Indonesia Projects 5.5% Q1 Growth Amid Global Geopolitical Risks

Jakarta: Coordinating Economic Affairs Minister Airlangga Hartarto said Indonesia expects first-quarter 2026 growth of at least 5.5 percent, citing resilient domestic demand despite risks from the Middle East conflict and global uncertainty.

“For the first quarter, we are optimistic growth will be at least 5.5 percent. By year-end, it will be at least 5.4 percent, in line with the state budget,” he said on Thursday, as quoted from Antara, Friday April 10, 2026.

The government will adjust economic policies in response to global developments, including the Middle East conflict, which could disrupt energy price stability and strain global supply chains.

However, Hartarto said the government is maintaining its 2026 baseline growth assumption at around 5.4 percent, as outlined in the state budget. He added that the outlook incorporates potential fluctuations in global oil prices, noting Indonesia’s average crude purchase price is about USD76 per barrel.

“Every USD1 increase in fuel prices impacts the budget by slightly over six trillion rupiah (USD351.55 million). Net effects, including export gains and subsidies, remain manageable,” he said.

Speaking after a cabinet meeting at the Presidential Palace in Jakarta on Wednesday, Hartarto said strong domestic fundamentals, particularly household consumption, underpin growth expectations.

Household consumption contributes roughly 54 percent to gross domestic product, making it a key driver of Indonesia’s economic resilience amid external pressures.

From a fiscal perspective, first-quarter budget performance showed improvement, with tax revenues rising 14.3% year-on-year to about 462.7 trillion rupiah (USD27.11 billion).

The manufacturing sector also remained in expansionary territory, supporting broader economic activity and reinforcing confidence in sustained growth momentum.

Food security remains stable, with rice production reaching 34.7 million tons in 2025 and current stockpiles at state logistics agency Bulog totaling around 4.6 million tons.

The government is preparing additional measures to sustain growth, including the rollout of the B50 biodiesel mandate scheduled to take effect on July 1, 2026.

“The B50 policy is expected to generate budget savings of up to 48 trillion rupiah (USD2.81 billion),” Hartarto said.

Authorities also pledged to maintain fiscal discipline, keeping the debt-to-GDP ratio at around 40 percent, below the legal ceiling of 60 percent.

The budget deficit is targeted to remain within three percent of GDP through the end of 2026, in line with statutory fiscal rules.