Indonesia's Economic Target 2026 5.4 Percent Is Considered Realistic But Demand Challenges Still Exist

JAKARTA - Head of Bank Permata economist Josua Pardede said that the 5.4 percent economic growth target that has been agreed by the government and the DPR is still realistic to achieve in 2026.

He said that in addition to agreeing on the economic growth target, the Government and the DPR have agreed on a number of basic assumptions that are anchored by policies such as inflation of 2.5 percent, the exchange rate of around Rp. 16,500 per US dollar, and the yield of 10-year tenor Government Securities (SBN) of 6.9 percent.

However, Josua considered that the target for economic growth was 5.4 percent, on a supply side, the target was still realistic.

According to him, this is supported by adequate banking liquidity conditions, reduced cost of funds, and Bank Indonesia's move to expand financing incentives to priority sectors so that lending rates are more competitive.

However, Josua reminded that the main challenge lies in the demand side, where credit growth has increased, but has not shown significant strengthening.

According to him, this is reflected in the high portion of credit ceilings that have not been withdrawn by customers, which are still in the range of more than a fifth, reflecting that some business actors are still careful in expanding.

"Therefore, in order for 5.4 percent to be achieved, the implementation of APBN spending must be fast and on target, the transmission of interest rates to credit needs to be deepened, and price stability and exchange rates are maintained so that household and corporate beliefs recover faster," he explained to VOI, Wednesday, September 24.

In addition, he said that the 2026 State Budget posture was prepared in an expansionary manner with a budget deficit of 2.68 percent of Gross Domestic Product (GDP), in order to encourage economic growth.

Josua added that state spending is also focused on priority programs such as the provision of free nutritious food (MBG), as well as strengthening food and energy security.

He said that the Government had also transferred cash amounting to Rp200 trillion from Bank Indonesia to Himbara banks to increase low liquidity in the banking system, so that lending could be more enthusiastic.

Previously, the Chairman of the DPR RI Budget Agency Said Abdullah conveyed the final results of the agreement with the government regarding the macro assumption of the 2026 State Budget. One of the agreed upon was economic growth at 5.4 percent.

Then, continued Said, inflation was set at 2.5 percent, the rupiah exchange rate was agreed at the level of Rp. 16,500 per US dollar, the 10 year SBN interest rate at 6.9 percent.

Said said, the price of Indonesian crude oil or Indonesia Crude Oil Price (ICP) is set at US$70 per barrel and oil lifting is 610.000 barrels per day and natural gas lifting is 984.000 barrels of oil equivalent per day.

"The entire agreement on the numbers above is that we assume it is an important foundation for the government," Said said at the 5th DPR Plenary Meeting of Session Period I 2025-2026 at the DPR Building, Parliament Complex, Jakarta, Tuesday, September 23.

Then, continued Said, the government targets economic growth to range from 7 to 8 percent in the medium term. Thus, the above 5.4 percent economic growth as an important foundation for the government.

"So that the entire people feels the economic growth cake. The DPR's Budget Agency together with the government agree that inflation and the rupiah exchange must be maintained so that it is stable. Because, both of them can trigger price turmoil in the real sector, cause shocks on the monitor side, and trigger another crisis eruption," he explained.

To achieve the inflation target and the exchange rate above, continued Said, the central government, local governments, and Bank Indonesia must always run harmoniously. The goal is that fiscal and monetary policies can be agile, creative, and at the same time consolidative.

Said said the 2026 SBN interest rate was also agreed at the level of 6.9 and would be positioned as a moderate level and as an upper limit psychologically.

According to Said, in the past month there have been signs of better stability in the financial market.

He said, if this trend continues, it is not impossible that the SBN interest rate next year can be reduced, so that the cost of funds borne by the APBN can also be lower.

"But we believe, the cowboy style of the Minister of Finance (Purbaya Yudhi Sadive) we can relax the strict and proven money policy. In this month, we hope that conditions will continue so that next year's SBN interest rate can be lower, so that the cost of funds borne by the state budget will be lower," he said.