PRIME NEWS POST 

 

By: Syafrudin Budiman, SIP
Chairman of the National Board of the Indonesian SMEs Association

For the past 12 years, Indonesia’s economic growth has stagnated at around 5 percent. This trend began in 2014 during the early administration of Joko Widodo – Jusuf Kalla, continued through the second term of Joko Widodo – KH. Ma’ruf Amin, and has persisted into the first year of the Prabowo Subianto – Gibran Rakabuming Raka administration (2025-2026).

As reported by kompas.id on February 15, 2025, Indonesia’s economic growth has consistently hovered around 5 percent—often referred to as the “5 percent growth trap”—particularly since 2014. This trend has continued for the past decade, including the post-pandemic period, with growth reaching 5.31% in 2022, 5.05% in 2023, 5.03% in 2024, and 5.11% in 2025.

Meanwhile, the economy is projected to grow between 4.9%–5.7% year-on-year (yoy) in 2026. This growth is supported by strong domestic demand, household consumption, investment, and the synergy between fiscal and monetary policies. Downstream processing of natural resources and government spending are the main drivers, with potential growth in Q1-2026 reaching 5.5%–6%. (Ministry of Economic Affairs Release, January 27, 2026).

It was noted that in Q4 2025, the Manufacturing Purchasing Manager’s Index (PMI) remained in expansion territory according to S&P Global surveys, retail sales grew positively, and the trade balance recorded a surplus.

Growth in narrow money (M0) was high at 11.4% yoy in December 2025, influenced by coordinated fiscal and monetary policy easing, in line with year-end government fiscal stimulus and central bank liquidity expansion. State cash placements in the banking system also boosted M0 growth and reduced banks’ cost of funds.

Meanwhile, broad money supply (M2) growth stood at 9.6% yoy in December 2025, driven largely by credit disbursement. With these developments, full-year 2025 economic growth is estimated to be around 5.2%.

Purbaya Optimistic Q1/2026 Growth Will Hit 6%

Minister of Finance Purbaya Yudhi Sadewa optimistically predicts that Indonesia’s economy will grow by 6% in Q1/2026, supported by State Budget (APBN) spending of IDR 809 trillion, exceeding the previous forecast of 5.6%.

Speaking at the Indonesia Economic Outlook 2026 event, Purbaya projected that the growth momentum seen in 2025 will continue into this year. Last year, Statistics Indonesia (BPS) reported full-year growth of 5.11%, with Q4/2025 specifically reaching 5.39%.

“The strong economic growth momentum seen in 2025 will continue into 2026. Our prediction for the first quarter is that the economy could grow between 5.5% to 6%,” he stated at Wisma Danantara, Jakarta, on Friday (13/2/2026).

This prediction is higher than previous estimates made by Purbaya and the Ministry of Finance. Previously, with the help of the 2026 Eid al-Fitr economic stimulus, fiscal authorities projected growth of 5.6% for the first three months of the year.

According to Purbaya, if the Q1/2026 growth target of 6% is achieved, Indonesia can officially escape the ‘5% growth curse’. The former Chairman of the Deposit Insurance Corporation (LPS) stated that the push to achieve this target comes largely from the state budget spending, which is targeted at IDR 809 trillion.

“State spending in Q1 2026 will reach IDR 809 trillion. We are also pushing investment and consumption, accelerating the Free Nutritious Meals program (MBG) worth IDR 62 trillion, along with other expenditures and a stimulus package of IDR 13 trillion. So, we are frontloading all spending in the first quarter to ensure growth momentum is sustained,” he explained.

For the full year, Purbaya estimates growth will reach between 5.4%—as targeted in the State Budget—and up to 6%. This projection exceeds estimates from the Coordinating Ministry for Economic Affairs.

Coordinating Minister Airlangga Hartarto Predicts 5.4% to 5.6%

At the same event, Coordinating Minister for Economic Affairs Airlangga Hartarto projected that Indonesia’s economy would grow within the target range of 5.4% to 5.6% in 2026.

“Economic growth is targeted at 5.4% in 2026, with potential to reach 5.6%,” Airlangga stated to President Prabowo Subianto, as reported by bisnis.com on February 15, 2026.

Optimistic Projections: On Track for 6% Growth

Indonesia’s economy in 2026 is predicted to strengthen, growing in the range of 4.9%–5.7% yoy. This is supported by strong domestic demand, household consumption, investment, and policy synergy. Downstream industries and government spending are key drivers, with Q1 growth potentially hitting 5.5%–6%. (Ministry of Finance, January 2026).

Key Highlights of 2026 Economic Projections:

– Growth Forecast: Bank Indonesia projects 4.9%–5.7%, while Permata Bank predicts 5.1%–5.2%, and APINDO estimates 5%–5.4%.
– Main Driver: Household consumption is expected to remain the largest contributor (approx. 53% of GDP) due to stable purchasing power and controlled inflation.
– Investment & Downstreaming: Gross Fixed Capital Formation (PMTB) will increase, supported by natural resource downstreaming and strategic projects.
– Government Support: Accelerated budget spending and holiday allowances (THR) are expected to boost consumption in Q1-2026.
– External Challenges: Despite optimism, risks remain including global pressures, the need for structural reforms, and investment sustainability. (CNBC Indonesia, Dec 31, 2025).

Overall, the 2026 economic outlook is bright and shows a positive trend post-2025.

What Economists Say

Entering 2026, eight leading Indonesian economists predict the economy will improve, growing faster than in 2025.

They believe household consumption—the main driver accounting for approx. 53% of GDP—will recover, supported by government policies aimed at increasing purchasing power through fiscal and monetary incentives.

Meanwhile, investment (PMTB), the second-largest component at 29.15% of GDP, will also strengthen, signaling more aggressive investment. Exports, contributing 22.18%, are also expected to remain stable amid a more conducive global trade climate.

Accelerated Growth

These economists, representing financial institutions and think tanks, agree growth will accelerate in 2026 compared to 2025. However, most believe it will not reach the government’s official target of 5.4%, with some projections even falling slightly below the 2025 target of 5.2%.

– BCA: Chief Economist David Sumual projects growth at 5.1%, supported by fiscal and monetary stimulus, though structural issues like slow income growth remain constraints.
– CGS International: Economist Wisnu Trihatmojo also projects 5.1%, noting that layoff pressures have eased, supporting consumption.
– Permata Bank: Josua Pardede estimates 5.1%–5.2%, driven by room for interest rate cuts and inflation kept below 3%.
– Maybank: Myrdal Gunarto predicts 5.21% due to conducive domestic conditions.
– UOB Kay Hian: Surya Wijaksana is more confident, projecting 5.3%, citing recovery in middle and upper-class purchasing power.
– Trimegah Sekuritas: Fakhrul Fulvian also projects 5.3%, supported by pro-growth policies.
– CORE Indonesia: Predicts a lower range of 4.9%–5.1%, warning that real wage pressures may hinder consumption growth.
– ISEAI: Ronny P Sasmita estimates 5%–5.4%, noting that consumption growth may slow structurally due to cost-of-living pressures.

Breaking the 5% Curse

The author projects Indonesia’s economic growth will surge above 6%, aligning with President Prabowo Subianto’s vision of achieving 6-8% growth. This is highly rational, especially with Q1 projections hitting around 6%, driven by high consumption during the January holidays and financial circulation during the Ramadan period (Feb-Mar 2026).

Looking at the political-economic direction of the Prabowo-Gibran administration—from their vision, mission, and policies—the focus is clearly on national independence, people-based economy, and a welfare state.

President Prabowo consistently addresses global strategic issues impacting Indonesia, such as food security, energy crises, financial instability, and the impacts of geopolitical conflicts (Russia-Ukraine, Israel-Palestine, US-China trade war), as well as post-pandemic recovery.

A key strategy is strengthening food and energy sovereignty through increased productivity and downstreaming within the country, reducing import dependency.

Therefore, the author is optimistic that Indonesia’s economy will continue to accelerate, “on the way” to 6% and heading towards 8%. Under the leadership of President Prabowo Subianto and Vice President Gibran Rakabuming Raka, the 12-year “curse” of 5% growth that has persisted since 2014 can finally be broken. (*)

@Reported from various media sources //photo from Google documents // contribution by Prime News Post international online media // news.paper
Related News