The economic performance of Indonesia in 2026 is robust but fragile, as growth in the short term is sustained, but the structural weakness remains unchanged. Growth of 5.61% year on year in the first quarter of 2026, higher than 4.87% in 2025, was fuelled by robust domestic demand and supportive fiscal policy. The growth was driven by higher growth of household expenditure, which accounted for more than half of total growth, of 6.44% year on year, up from 4.87% in 2025, as well as of gross fixed capital formation of 6.04% year on year, up from 4.36% in 2025. Also, all broad sectors such as manufacturing, mining, and construction contributed positively to total growth. Thus, Indonesia is robust as the economy is growing in the short term but is fragile as growth is based on several factors which could cause pressure on the currency and impact on fiscal accounts as well as other inefficiencies that could affect the sustainability of growth.

Positive Indicators. From a surface perspective, Indonesia’s economy is still performing well. In the first quarter of 2026, the country’s GDP growth rate was recorded at 5.61% YoY, up from 4.87% in the previous year. The growth was driven mainly by high household consumption, which accounts for more than 50% of the country’s total GDP, and reached as much as a 3% growth rate. The factors that supported the growth of household consumption were a relatively stable inflation rate, the usual seasonal spending, as well as the government’s transfer programs to the citizens. In addition, the country’s gross fixed capital formation (investment) also grew robustly at around 6% YoY, which was supported by the government’s infrastructure spending as well as the positive........

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