**Indonesia’s 2026 Economic Growth Forecasted at 5.3‑5.6 %, Says GREAT Institute**
*Jakarta, 30 August 2026* – The research organization GREAT Institute projects that Indonesia’s real Gross Domestic Product (GDP) will expand at an annual rate of between 5.3 % and 5.6 % in 2026. The forecast, released in the institute’s “GREAT Mid‑Year Economic Outlook 2026: Rebuilding Trust, Fostering Optimism” report, is based on expectations of continued domestic demand, a strengthening private‑sector investment climate, and a resilient fiscal stance, while acknowledging persistent global uncertainties.
**Key Drivers and Conditions**
– **Domestic consumption**: In the first half of 2026, Indonesia recorded a cumulative GDP growth of 5.45 %. Government consumption rose 18.62 % year‑on‑year (yoy), providing a significant fiscal boost. Household consumption grew 5.06 % yoy in the second quarter, though the institute cautioned that consumer confidence showed signs of moderation. The Consumer Confidence Index fell from 123.0 in April to 116.8 in July, and retail sales contracted in the April‑June period before a modest 0.9 % rise in July.
– **Business activity**: Indicators of private‑sector dynamism improved. Electricity consumption by businesses increased 10.04 % yoy, while industrial electricity use rose 6.54 % yoy. Sales of commercial vehicles surged 30.12 % through June, reflecting expanding operational activity.
– **Investment**: Gross investment in the first half of the year reached IDR 1,010.6 trillion, a 7.2 % increase over the same period in 2025. In July, investment‑related credit grew 23.1 % yoy, and working‑capital credit rose 11.6 % yoy. GREAT Institute’s senior economist Adrian Nalendra Perwira emphasized that sustaining this momentum will require “policy measures that reduce investment barriers, provide regulatory certainty, accelerate project implementation, and ensure liquidity reaches productive activities.”
**Policy Implications**
Perwira noted that while fiscal stimulus in the first half of 2026 helped anchor growth, the focus must shift from “spending more” to “spending better.” He argued that the government’s role should evolve from direct stimulus to acting as a catalyst for private‑sector investment and productivity gains.
**External Risks**
The institute warned that global factors could constrain Indonesia’s growth trajectory. The Global Economic Policy Uncertainty index averaged 68 % above its 2024 level during the first half of 2026, and the Geopolitical Risk Index was roughly 55 % higher. Elevated geopolitical tensions, volatile energy prices, tight global monetary conditions, and shifts in international trade patterns remain sources of external pressure.
**Comparison with International Forecasts**
GREAT Institute’s projection of 5.3‑5.6 % exceeds the growth estimates of the International Monetary Fund (IMF) and the World Bank, which hover around 5 % for 2026. The institute clarified that the higher range is not a guarantee but reflects the potential for stronger performance if macro‑economic stability, investment quality, and policy credibility are maintained.
**Confidence as a Growth Lever**
According to the report, trust in institutions and policy predictability are critical for sustaining consumption and investment. Perwira stated, “Optimism cannot be mandated; it must be built. Consistent policies, transparent communication, reliable data, and responsive governance are essential to encourage households and businesses to make forward‑looking decisions.”
**Outlook**
The forecast hinges on Indonesia’s ability to preserve its domestic growth base while enhancing private‑sector productivity and investment. Should macro‑economic stability be upheld and policy certainty improve, the country could achieve growth at the upper end of the projected range. Conversely, heightened global uncertainty or domestic policy missteps could limit performance to the lower bound or below.
Article and image source: ekbis.harianjogja.com
