JAKARTA – Citi Group forecasts that the United States (US) will avoid a recession in 2025. This view aligns with Goldman Sachs and JPMorgan, who have revised down the probability of a US recession to 35% and 50% respectively.

“Citi does not expect a recession in America. We anticipate a contraction in US economic growth,” said Helmi Arman, Chief Economist of Citi Indonesia, during a press conference on Citi Indonesia’s Q1 2025 performance, Monday (26/5).

He added that the US might only experience a contraction in economic growth if import tariffs are implemented.

In the short term, however, US economic data is expected to strengthen, driven by front-loaded purchases—consumers buying more in advance to avoid potential higher tariffs.

“But once the impact of tariffs is reflected in prices, demand growth could be hit. Hence, we project a contraction in US economic growth in Q3,” Helmi said.

This, he added, will trigger interest rate cuts by the Federal Reserve. “We expect that to start in August,” said Helmi.

According to Citi Group, the Fed is likely to cut rates four times through the remainder of 2025—more than the market consensus, which expects only two cuts.

Domestically, Citi Indonesia projects that Bank Indonesia (BI) will lower its benchmark interest rate twice by 25 basis points, bringing it to 5% by the end of 2025.

“The latest would be August; possibly July or June,” Helmi noted.

He explained that, in addition to strong capital inflows into Indonesia, BI’s room to lower rates stems from structural changes in the foreign exchange demand-supply dynamic within the corporate sector.

This is due to the tightening of export proceeds (DHE) regulations. According to Helmi, companies now prefer to convert their DHE into rupiah instead of holding them in dollars for a year, to maintain liquidity in working capital.

“This has led to a better balance in the forex market, reducing the need for BI to intervene as aggressively as before,” Helmi concluded. (ZH)