Indonesia’s 2026 Economic Growth Projected Around Five Percent

The Institute for Economic and Social Research of the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) projects Indonesia’s Gross Domestic Product (GDP) growth for 2025‑2026 to remain between 4.9 % and 5 %. The estimate was released in the Indonesia Economic Outlook 2026 report on 4 November 2025. It reflects an economy that is undergoing a governmental transition.

LPEM notes that large‑scale populist programs, such as the Free Nutritious Meal (MBG) initiative and the establishment of Red‑White Cooperatives, have expanded fiscal spending, forcing cuts to regional transfers. Simultaneously, household consumption has weakened because of higher staple‑food prices and limited real‑income growth, while the labour market has absorbed more informal workers. These factors reduce purchasing power and create a gap between headline growth figures and real‑sector activity.

Unaddressed fiscal strain and weak domestic demand could threaten macro‑economic stability, investor confidence, and Indonesia’s sovereign credit rating. LPEM stresses the need for structural reforms that boost productivity, create formal jobs, and improve the investment climate. For taxpayers and businesses, policies that strengthen long‑term economic capacity can stabilise tax burdens and support inclusive growth.