05.06.2026
Indonesia’s economy remained resilient in 2025, supported by investment, services, agriculture, commodity exports and front-loaded manufacturing shipments. Growth is expected to slow in 2026 as higher oil prices, weaker investor sentiment and global uncertainty weigh on consumption and investment, before recovering in 2027. Inflation is projected to remain within Bank Indonesia’s target range, although food prices, fuel costs and tariff adjustments create upside risks. The fiscal deficit has widened close to the legal ceiling, and public debt is expected to rise gradually. The current account is projected to move deeper into deficit as resilient domestic demand and higher fuel prices increase imports.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 5.1 | 4.7 | 5.2 |
| Inflation (%, yoy) | 1.9 | 3.4 | 2.9 |
| Employment rate (% of working-age population, 15+) | 67.2 | 67.3 | 67.4 |
| Fiscal balance (% of GDP) | -2.9 | -2.8 | -2.8 |
| Gross public debt (% of GDP) | 40.5 | 40.6 | 41.0 |
| Current account balance (% of GDP) | -0.1 | -0.6 | -0.8 |
Growth slows temporarily in 2026
Indonesia’s real GDP grew by 5.1% in 2025, supported by investment, exports and strong performance in services and agriculture. Manufacturing exports benefited from front-loaded shipments and global demand for commodities, while palm oil and other agricultural activity also supported growth. Private consumption remained resilient, although it slowed compared with 2024 despite fiscal stimulus.
Growth is projected to slow to 4.7% in 2026 as higher oil prices, uncertainty and weaker investor sentiment weigh on private consumption and investment. It is expected to recover to 5.2% in 2027, supported by stronger investment, credit growth, downstreaming policies and efforts to remove bottlenecks for foreign direct investment.
Inflation remains within the target range
Inflation averaged 1.9% in 2025, but price pressures increased in early 2026 as temporary electricity subsidies expired, water tariffs were adjusted and food prices rose. Headline inflation reached the upper end of Bank Indonesia’s target range in March 2026.
Inflation is projected at 3.4% in 2026 and 2.9% in 2027, remaining within the 2.5% ±1 percentage point target range if second-round effects are contained. The main risks come from higher fuel prices, food inflation, exchange-rate pressures and transport costs. Bank Indonesia’s policy stance is therefore likely to remain focused on rupiah stability and inflation control while still supporting growth.
Fiscal risks require close monitoring
The fiscal deficit widened to 2.9% of GDP in 2025, close to the legal ceiling of 3% of GDP. Revenue underperformed because of accelerated tax refunds and transfers of state-owned enterprise dividends, while expenditure consolidation was needed to contain the deficit.
The deficit is projected to remain around 2.8% of GDP in 2026–2027. Public debt is expected to rise gradually from 40.5% of GDP in 2025 to 41.0% in 2027. Debt remains manageable, but fiscal credibility has become more important as markets reassess Indonesia’s policy mix, the role of state-owned enterprises and the predictability of the fiscal framework.
External position remains manageable but import pressures rise
The current account deficit narrowed to 0.1% of GDP in 2025, supported by commodity exports and front-loaded manufacturing shipments. International reserves remained adequate, covering more than six months of imports.
The deficit is projected to widen to 0.6% of GDP in 2026 and 0.8% in 2027 as higher oil prices and resilient domestic demand raise imports. Export revenues should still be supported by coal, LNG, nickel, gold and palm oil, but Indonesia remains exposed to commodity prices, Chinese demand, global trade policy uncertainty and portfolio-flow volatility.
Overall outlook
Indonesia’s outlook remains broadly positive, with growth expected to recover in 2027 after a temporary slowdown in 2026. Inflation should remain within the central bank’s target range, and public debt remains moderate. The main challenges are preserving fiscal and monetary credibility, improving investor confidence, strengthening tax revenues and ensuring that state-led investment supports productivity rather than adding fiscal risks. Sustained medium-term growth will depend on deregulation, financial-sector deepening, trade openness, better jobs and productivity-enhancing reforms.
Sources:
World Bank, Indonesia Macro Poverty Outlook, April 2026.
International Monetary Fund, World Economic Outlook, April 2026.
Asian Development Bank, Asian Development Outlook, April 2026: Indonesia.
Bank Indonesia, Monetary Policy Decision and Inflation Developments, May 2026.
Bank Indonesia, Indonesia Economic Report and Financial Stability materials, 2025–2026.
