Indonesia's 2026 Economic Outlook: Challenges and Opportunities

Moderate Growth Amid Global Uncertainties

Indonesia's economy is expected to continue growing in 2026, although at a moderate pace, as it navigates through various global economic challenges. The International Monetary Fund (IMF) and other global institutions have projected Indonesia's growth to be around 5% ⁵

Key Drivers of Growth

1. Domestic Consumption: Private consumption is expected to remain a key driver, supported by government programs and initiatives ⁶
   Source 6

   https://nasional.kontan.co.id/news/belanja-apbn-2026-tembus-rp-38427-triliun-indef-ingatkan-kualitas-risiko-fiskal
   .
2. Natural Resource Sector: Indonesia's rich natural resources continue to be a significant contributor to economic growth ⁷
   Source 7

   https://nasional.kontan.co.id/news/proyeksi-ekonomi-2026-konsumsi-dan-sektor-sda-kuat-manufaktur-padat-karya-menantang
   .
3. Infrastructure Spending: The government's focus on infrastructure development is likely to provide additional stimulus to the economy ²
   Source 2

   https://nasional.kontan.co.id/news/belanja-apbn-2026-melonjak-tapi-penerimaan-negara-diproyeksi-kembali-melempem
   .

Challenges Ahead

1. Global Trade Uncertainties: Ongoing trade tensions, particularly between the US and China, pose risks to Indonesia's export-driven sectors ¹
   Source 1

   https://nasional.kontan.co.id/news/ekonomi-indonesia-2026-diproyeksi-membaik-meski-lebih-rendah-dari-target-pemerintah
   .
2. China's Economic Slowdown: As China is a major trading partner, its economic performance directly impacts Indonesia's economy ¹
   Source 1

   https://nasional.kontan.co.id/news/ekonomi-indonesia-2026-diproyeksi-membaik-meski-lebih-rendah-dari-target-pemerintah
   .
3. Manufacturing Sector: Labor-intensive manufacturing faces challenges due to global competition and potential trade barriers ⁷
   Source 7

   https://nasional.kontan.co.id/news/proyeksi-ekonomi-2026-konsumsi-dan-sektor-sda-kuat-manufaktur-padat-karya-menantang
   .

Fiscal Policy and Budget Allocation

The Indonesian government has proposed a Rp 3,842.7 trillion state budget for 2026, representing a significant increase from the current year's outlook of Rp 2,865.5 trillion ²

Budget Allocation

• Central Government Spending: Rp 3,149.7 trillion
• Regional Transfers: Rp 693 trillion ²
  Source 2

  https://nasional.kontan.co.id/news/belanja-apbn-2026-melonjak-tapi-penerimaan-negara-diproyeksi-kembali-melempem

The budget allocation reflects the government's commitment to supporting economic growth through both direct spending and regional support.

Expert Opinions

Economists from various institutions have provided insights into Indonesia's economic prospects:

• Josua Pardede (Permata Bank): Emphasized the importance of tax revenue optimization as the government relies heavily on tax income ⁴
  Source 4

  https://nasional.kontan.co.id/news/penerimaan-negara-2026-bertumpu-pada-pajak-perluasan-basis-pajak-mendesak-dilakukan
  .
• Raden Pardede (CCreo Research Institute): Sees a 5% growth as a realistic baseline scenario for 2026 ⁵
  Source 5

  https://nasional.kontan.co.id/news/perizinan-dan-investasi-dinilai-jadi-kunci-pertumbungan-ekonomi-ri-pada-2026
  .
• David Sumual (BCA): Highlighted the potential impact of global uncertainties on Indonesia's economy, particularly through trade and investment channels ⁷
  Source 7

  https://nasional.kontan.co.id/news/proyeksi-ekonomi-2026-konsumsi-dan-sektor-sda-kuat-manufaktur-padat-karya-menantang
  .

Conclusion

While Indonesia faces significant global economic challenges in 2026, the country's strong fundamentals and proactive government policies are expected to support continued economic growth. The focus on domestic consumption, infrastructure development, and natural resource sectors will be crucial in navigating the uncertain global environment.