MACROECONOMIC ANALYSIS SERIES: Indonesia Economic Outlook 2026 - Suboptimal Quality of 5% Growth

Jahen F. Rezki (), Teuku Riefky (), Faradina Alifia Maizar (), Difa Fitriani (), Mervin Goklas Hamonangan (), Hardi Salim () and Alif Ihsan A Fahta ()
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Jahen F. Rezki: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Teuku Riefky: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Faradina Alifia Maizar: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Difa Fitriani: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Mervin Goklas Hamonangan: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Hardi Salim: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)
Alif Ihsan A Fahta: Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)

No 202504, LPEM FEBUI Quarterly Economic Outlook from LPEM, Faculty of Economics and Business, University of Indonesia

Abstract: Throughout 2025, Indonesia’s economy has experienced an eventful transition. The new government administration has brought about series of policy shifts. First, the new administration introduced numerous populist programs, such as free meal program and rural cooperatives, which generated massive fiscal implication and forced the government to implement aggressive budget cuts in various spending items including regional transfers. Second, mounting political pressures to accelerate growth has raised concerns over the erosion of central bank’s independence and fiscal authority role in influencing liquidity amidst the ongoing period of Rupiah depreciation. Third, the reported GDP growth for Q2-2025 presents several inconsistencies and anomalies when cross-checked against broader macroeconomic and micro-level indicators. Although headline figures suggest stronger growth compared with Q1-2025, several underlying indicators point to a weakening domestic demand and slower production activity. Fourth, the combination of rising interest payment, stagnant revenue receipts, and enormous expansion of fiscal spending due to populist program has brought serious risks on fiscal sustainability.

Keywords: gdp; —; economic; quarterly; —; economic; outlook; —; inflation; —; macroeconomics (search for similar items in EconPapers)
Date: 2025-04, Revised 2025-04
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