Indonesia's Economy in 2026

Indonesia grew 5.61% year-on-year in the first quarter of 2026, its strongest first quarter in years. The composition is the interesting part. Government consumption grew 21.81% and contributed 1.26 percentage points of that 5.61 — from a base that had contracted a year earlier, so it is not repeatable. Inside manufacturing, growth is carried by basic metals, the nickel and downstreaming chain, and by food and beverages, which is where the free nutritious meals programme lands. The labour-intensive, export-facing subsectors — textiles, footwear, furniture, wood, rubber and plastics, transport equipment — are flat or shrinking, and PMI manufacturing has been below 50 for five straight months.

The external picture turned during the year. The trade surplus fell from USD 15.4 billion to USD 4.0 billion in twelve months, and May 2026 alone was a deficit. Brent averaged around USD 90 against the budget’s USD 70 assumption, peaking at USD 138 in April, which shows up simultaneously in the fuel import bill, in administered-price inflation, and in the subsidy and compensation line, already at 52.1% of its full-year budget after six months.

The fiscal section makes one argument: the constraint is not the debt stock, which is around 40% of GDP, but the interest bill. Net interest has risen from 1.36% of GDP in 2014 to a projected 2.43% in 2026, while the primary balance has sat close to zero. A deficit that is mostly interest cannot be fixed by spending discipline alone. The final section turns to geoeconomics — rising geopolitical risk, industrial policy interventions running at roughly twice the rate of the 2010s, trade reorganising along blocs, and Indonesia’s own import concentration, with China now supplying 41.83% of non-oil imports.