ADB: Domestic Consumption Can Hold The Impact Of Global Economic Weakening Until 2026

JAKARTA - The Asian Development Bank (ADB) stated that domestic consumption could withstand the impact of weakening the global economy until 2026, according to an Asian Development Outlook September 2025 report published in Manila, Philippines, Tuesday, September 30.

In the report, the analysis of Indonesia's economic conditions was written by the Senior Economic Officer of ADB Indonesia Resident Mission Priasto Aji and the Principal Country Economist of ADB Indonesia Resident Mission Reza Anglingkusumo.

ADB projects that the Indonesian economy will grow 4.9 percent year-on-year (yoy) and the inflation rate will reach 1.7 percent yoy in 2025. Indonesia's Gross Domestic Product (GDP) growth is also expected to increase to 5 percent yoy in 2026, with an inflation rate of 2 percent yoy.

"Although weakening global economic growth will affect trade (exports and imports), domestic consumption will continue to support the national economy," the ADB economist team wrote in the report, quoted by Antara, Wednesday, October 1.

Throughout the first semester of 2025, the realization of government spending was slower because the new program was still in the implementation stage. However, ADB estimates that state spending will increase gradually in the second half of 2025 to 2026, so that fiscal stimulus can further reduce external impacts.

On the monetary side, the easing of the Bank Indonesia (BI) benchmark interest rate by a total of 150 basis points since September 2024 to 4.75 percent as of September 2025 is expected to support economic activity, while the investment momentum is starting to strengthen.

ADB also noted that the risk of inflation remains under control. The average inflation is projected to be only 1.7 percent by 2025, lower than the previous estimate of 2.0 percent.

This price stability provides space for more accommodative monetary policy to support growth.

In terms of fiscal, the government raised the target deficit in 2025 to 2.8 percent of GDP, still below the 3 percent legal threshold.

Meanwhile, for 2026, the budget deficit is projected to be around 2.7 percent of GDP with fixed spending directed at human development programs, extreme poverty alleviation, and inequality reduction.

ADB assesses that Indonesia's commitment to trade openness, improving the investment climate, and structural reforms is the key to encouraging investment, increasing productivity, and expanding job creation.

"The commitment to sustainable reform and openness is expected to increase growth and increase employment opportunities, in line with Indonesia's long-term development targets (the 2025 Golden Indonesia vision)," said the ADB economist team in the report.

The projection of Indonesia's economic growth in the Asian Development Outlook in September 2025 is lower than the Asian Development Outlook in April 2025.

In the outlook published in April 2025, the national economy is estimated to grow 5 percent yoy in 2025 and 5.1 percent in 2026.