INDEF Projects Indonesia's Economy to Grow 5 Percent in 2026

JAKARTA - The Executive Director of the Institute for Development of Economics and Finance (INDEF) Esther Sri Astuti stated that Indonesia's economic growth is projected to reach 5 percent year-on-year (yoy) in 2026.

Although the projection shows stability in the domestic economy, he asked the government not to rely solely on household consumption as the engine of national growth.

"Activating other economic growth engines is a fardhu ain (obligatory) thing. So enough, household consumption has dominated for too long and has contributed dominantly to economic growth (domestic)," he said in Jakarta, quoted by Antara, Tuesday, December 30.

Esther assessed that the future economic challenges are still quite heavy, given the global geopolitical developments and the dynamics of the fragmentation of international trade are still difficult to predict.

Meanwhile, the recovery of Indonesia's domestic economy is still not optimal due to pressure on the prices of food and energy commodities and people's purchasing power which has not fully recovered.

In addition, he continued, Indonesia also has a high dependence on imports, ranging from capital goods to food, so that the country's foreign exchange actually flows back abroad.

Esther said that these various factors make Indonesia's economic fundamentals relatively more vulnerable than other countries in the Southeast Asian region, thus reducing Indonesia's competitiveness.

"If you look at it, the neighboring countries are Singapore, Malaysia, Thailand, and so on, they are indeed affected (by global economic dynamics), but because the immunity of their economic growth is relatively strong, the impact is not too severe," he said.

To overcome these challenges, his party encourages the strengthening of the fundamentals of the domestic economy by not placing all the burden of growth on the purchasing power of the community alone.

He said that government spending must play a more effective role in generating a multiplier effect on the people's economy, while the export sector needs to be developed to produce more high-value-added commodities.

"Investment, then exports, and government spending must also be active in increasing economic growth, so that the role of investment, exports, and government spending can boost economic growth not only 5 percent but can reach more than 5 percent," said Esther Sri Astuti.

The following is a summary of Indef's projection of Indonesia's economy in 2026.

Economic growth: 5 percent Rupiah exchange rate per US dollar: Rp17,000 Inflation rate: 3 percent Unemployed rate (TPT): 4.75 percent Poverty rate: 8.45 percent Gini ratio: 0.373