Indonesia's 2026 Economic Outlook: Balancing Growth and Stability

Credit Growth Targets for Financial Stability

Bank Indonesia has set a target for credit growth between 8-12% in 2026, considering this range ideal for maintaining financial system stability while supporting economic growth ¹

. According to BI Assistant Governor Solikin M. Juhro, growth outside this range could either pressure banking resilience or slow economic recovery. This target reflects a balance between banking intermediation and stability risks, particularly in maintaining credit quality and capital adequacy.

Economic Growth Projections for 2026

DBS Group Research projects Indonesia's GDP to grow by 5.2% in 2026, driven by expansionary fiscal policy including the "8+4+5" stimulus package worth IDR 16.2 trillion ²

. The forecast is supported by increased public spending, positive external trade performance, and improving investment climate. The shift from fiscal conservatism to more expansive policies is evident in the wider deficit (-2.68% of GDP) and increased spending on social welfare, food security, and defense, while remaining below the 3% GDP threshold.

Monetary Policy and Inflation Outlook

The monetary policy is expected to remain dovish, with potential for further interest rate cuts up to 75 bps, forex market interventions, and liquidity expansion to support credit growth and policy transmission ²

. Inflation is projected to average 2.5% year-on-year, with limited pressure from food and precious metals prices. The macroeconomic stability is expected to be maintained despite a wider current account deficit projected at -1% of GDP.

Currency and External Stability

The Indonesian Rupiah is expected to enter 2026 with more stability following Bank Indonesia's forex operations that kept USD/IDR between 16,500-16,800. While the currency remains vulnerable to both domestic and external risks, BI projects an average USD/IDR rate of 16,430 in 2026, slightly better than the government's macroeconomic assumptions. The IMF's latest Article IV Review highlighted Indonesia as a "global bright spot" with strong macroeconomic stability, controlled inflation, and a manageable current account deficit.

Market Performance and Investor Sentiment

The Jakarta stock market has shown a 22% increase through 2025, driven by growing domestic investors from 15 million to 19 million accounts. The 10-year bond yields have narrowed more quickly compared to US yields. However, the rupiah remains sensitive to domestic and external risks, particularly policy credibility and global trade dynamics. The divergence between CDS spreads and exchange rate movements reflects market sensitivity to the new cabinet's fiscal policy credibility.