Weaker commodity prices and consumer spending, together with a slowdown in its key trading partner, China, has hurt growth.
Towards the end of last year, however, the economy expanded by just over 5%, boosted by government spending.
President Joko Widodo had promised to lift annual growth to 7% on average.
However, the country has seen an average of just under 6% growth over the past decade and analysts have said growth is unlikely to improve for some time.
"The fourth quarter data is a positive surprise," economist Tony Nash told the BBC.
"But unfortunately the uptick will likely be short lived. We expect deterioration in the first quarter and it'll be tough to regain growth momentum before 2017," he added.
Mr Widodo made his promise to raise growth when his five-year term began in 2014, but he has faced problems boosting government spending and has seen several large infrastructure projects delayed.
A $5.5bn high-speed railway project, funded by China, was signed last year and is scheduled to be up and running by 2019.
But the project has faced widespread objections from transport experts and its long-term viability has been questioned.
Mr Widodo has also faced international condemnation for the country's man-made forest fires, which have caused serious economic and environmental damage.
In December, the World Bank said Indonesia's forest fires last year had likely cost the country more than twice the amount spent on reconstruction efforts after the 2004 Aceh tsunami.
In its quarterly report, the bank said the fires had cost some 221tn Indonesian rupiah ($15.72bn; Â£10.5bn).
It added that regional and global costs would be much higher.

Police were called to reports of an explosion at the Village Pharmacy building on Main Street, Cumbernauld, at about 01:05 on Wednesday.
Local people reported seeing men trying to remove the cash machine, which was badly damaged along with the building.
It is believed they left the scene in an Audi car. No-one was injured during the robbery.
Det Sgt Cameron Miller said officers were studying CCTV images from the area.
"The people responsible for this crime have not only stolen a large amount of money, they have also caused significant damage to the building," he said.
"It is important they are traced as quickly as possible and I would appeal to anyone who heard or saw anything in the area around that time to come forward, no matter how minor they think their information may be."
Det Sgt Cameron added: "Some of the witnesses we've spoken to so far have reported seeing a group of men wearing masks and dark clothing around the location before entering a light coloured Audi motor vehicle.
"A second car, possibly a Volkswagen, was also seen near the premises around that time.
"Anyone who thinks they can assist with our inquiries can contact us."

The military said the driver was taken into custody after the incident near the Jewish settlement of Ofra.
It brings to 41 the number of Israelis killed in knife, gun and car-ramming attacks since October 2015.
Local media have named the driver as 22-year-old Malek Hamad, from the West Bank town of Silwad.
Witnesses told Israeli media that the car approached a bus stop at the Ofra junction, on the Route 60 highway north-east of Ramallah, and then accelerated towards the two Israelis waiting there.
Sgt Elchai Teharlev, 20, died at the scene, while the second victim, aged 19, was reportedly lightly injured and taken to hospital in Jerusalem for treatment.
The Palestinian militant group, Hamas, praised what it called the "heroic" attack.
In late 2015 and 2016, such attacks by Palestinians or Israeli Arabs happened with near-daily frequency but the rate has dropped in recent months.
At least 242 Palestinians - 162 of them attackers, Israel says - have also been killed in that period, Reuters news agency reports. Others have been killed in clashes with Israeli troops.
Israel has accused Palestinian leaders of inciting the attacks, but they have blamed frustration rooted in decades of Israeli occupation.
Growth in South East Asia's largest economy, Indonesia, has come in at 4.76% for 2015, marking the fifth consecutive yearly decline.
[NEXT_CONCEPT]
A gang of masked men have stolen a five-figure sum of cash from a post office ATM in North Lanarkshire.
[NEXT_CONCEPT]
An Israeli soldier has been killed and another Israeli hurt in a Palestinian car-ramming attack in the occupied West Bank, the Israeli military says.