Fragile Recovery, Indef Prediction Of Economic Growth 2026 No More Than 5 Percent

Director of Indef Program Eisha Rachbini. (Photo: ANTARA)

JAKARTA - The Institute for Development of Economics & Finance (Indef) estimates that Indonesia's economic growth in 2026 will only be in the range of 5 percent.

This projection comes amid a domestic recovery that is considered still fragile and global pressure.

Program Director Indef Eisha Rachbini explained, the projection has taken into account various external and internal factors that have the potential to hamper the growth rate of the national economy next year.

"Our economic growth value will be around 5 percent. The consideration is an increase in global uncertainty, then a fragile recovery in domestic consumption," said Eisha in the 2026 Indonesian National Economic Projection Seminar virtually, Thursday, November 20.

According to Eisha, domestic consumption has not fully recovered due to the high risk of inflation, especially from food and energy commodities. He said, this situation could restrain people's purchasing power throughout 2026.

Meanwhile, in terms of investment, Indef assesses that his prospects are not yet fully expansive. Eisha also warned that if incoming investments are not directed to the productive sector, the impact on the economy will be minimal.

"If the investment is not productive, then the impact on the economy will not be large because capital-intensive projects have small multipliers," he said.

Eisha also highlighted the structural challenges that still surround the labor market, ranging from the high proportion of informal workers to the incompatibility of skills.

According to him, this condition is an obstacle for strengthening the long-term economy.

With these various dynamics, he continued, the space for accelerating economic growth in 2026 is still limited.

Therefore, the government needs to strengthen purchasing power, encourage productive investment, and improve the quality of the labor market.

"As long as the characteristics of the labor market do not change, the pressure on the creation of quality jobs will remain high," he said.

On the other hand, Eisha said Indef predicts the rupiah exchange rate has the potential to weaken to around Rp. 17,000 per US dollar in 2026.

According to him, external and structural pressure is still dominant against exchange rate movements.

"Geopolitical and trade fragmentation are likely to continue, and this increases investor risk aversion. As a result, the pressure on the rupiah will remain high," he said.

Meanwhile, Eisha said the inflation rate in 2026 is estimated to be around 3 percent, higher than this year. According to him, the government's push to domestic demand, including through the Free Nutrition Food Program (MBG), will begin to be felt next year.

However, Eisha said, without increasing food production capacity and commodity supply, the demand boost could actually trigger price pressure.

"If production capacity does not improve, demand impetus can even increase food inflation," he explained.

Dia menambahkan, komponen volatile food diperkirakan tetap menjadi pendorong utama inflasi.

Selain itu, rencana penyesuaian tarif listrik, BBM nonsubsidi, dan subsidi LPG juga menjadi risiko tambahan.

“Ini semua menjadi risiko ke depan terhadap kenaikan inflasi,” tutur Eisha.

He added that volatile food components are expected to remain the main driver of inflation.

In addition, the plan to adjust electricity tariffs, non-subsidized fuel, and LPG subsidies is also an additional risk.

"This is all a risk going forward to rising inflation," said Eisha.