The Center for Economic Reform in Indonesia (CORE) has announced its forecasts for the growth of the Indonesian economy in the first quarter of 2026, predicting growth between 5.2% and 5.3%. This growth is attributed to increased household consumption, investments, and high government spending.
During a public discussion in Jakarta, CORE's Executive Director, Muhammad Faisal, emphasized that key factors supporting growth include strong household consumption, with the real sales index recording a growth of 4.86% in the first quarter of 2026, compared to 2.77% during the same period last year.
Economic Indicators and Consumer Sentiment
Data shows that the economic condition index has improved, rising to 115.5 from 110.7 in the fourth quarter of 2025, reflecting consumer optimism. However, Faisal noted that the quality of consumption remains weak, with spending concentrated on basic needs while non-essential expenditures have declined.
On the financial side, the report indicates that the acceleration of government spending has contributed to supporting growth, although it has led to an expanding budget deficit. Government spending increased by 31% year-on-year, resulting in a deficit of 240.1 trillion rupiah, equivalent to 0.93% of GDP by the end of March 2026.
Historical Context and Government Strategies
Historically, the Indonesian economy has experienced fluctuations due to global and local challenges. In recent years, there has been an increasing focus on boosting domestic consumption as a means to support economic growth. However, reliance on exports, particularly in sectors such as mining and agriculture, continues to pose significant challenges.
The Indonesian government is striving to achieve a balance between promoting economic growth and reducing the budget deficit, which requires effective strategies in financial resource management.
Forecasts and Economic Challenges
Forecasts suggest that growth in the first quarter may reach 5.4% or 5.5%, but it is expected to slow down in the second and third quarters of 2026 due to global pressures and rising energy prices. This slowdown serves as a warning to Indonesian authorities about the need for swift action to address economic challenges.
The impact of domestic policies, such as the Domestic Market Obligation (DMO) affecting coal and palm oil exports, may have negative implications for economic growth. Exports from key sectors have significantly declined, raising concerns about the sustainability of growth.
Regional Significance and Conclusion
These projections are an important indicator of the health of the Indonesian economy and its impact on regional and global markets. The government’s ability to navigate these challenges will be crucial for maintaining economic stability and growth.
In conclusion, while the Indonesian economy shows signs of growth, the challenges posed by external factors and domestic policies necessitate careful monitoring and proactive measures to ensure continued progress.