8 Key Indonesian Economic Indicators: Still Healthy or Starting to Ail?
Bank Indonesia (BI) has taken an aggressive step in its monetary policy. During the monthly Board of Governors Meeting on 18-19 June 2026, the central bank decided to raise the BI Rate by 25 basis points (bps) to 5.75%.
This increase was not an isolated move. Previously, BI had raised the benchmark interest rate by 50 bps during the 19-20 May 2026 meeting, from 4.75% to 5.25%. Shortly thereafter, BI surprised the market again during a weekly meeting on 9 June 2026 by raising the BI Rate by 25 bps to 5.50%.
With the additional hike in the June meeting, the total increase in the BI Rate within approximately one month has reached 100 bps. This move demonstrates that BI has chosen a firm path of stabilisation, particularly to safeguard the rupiah exchange rate and curb inflation risks amidst high global pressures.
BI emphasised that the interest rate hike is a follow-up measure to strengthen the stability of the rupiah exchange rate, as well as a pre-emptive step to ensure that inflation in 2026 and 2027 remains within the government’s target.
However, high interest rate policies certainly do not only impact financial markets. In the longer term, rising rates could also affect consumption, credit, investment, purchasing power, and business activities.
So, what is the condition of the Indonesian economy as BI becomes increasingly aggressive in tightening monetary policy? The CNBC Indonesia research team has summarised the latest condition of the Indonesian economy based on several key indicators.
- Indonesian Economic Growth
Indonesia’s economy continues to show strong performance early this year. The Central Bureau of Statistics (B/BPS) recorded that the Indonesian economy grew by 5.61% year-on-year in the first quarter of 2026.
This figure serves as a positive signal as the economy is still able to grow above the 5% psychological level. This growth also indicates that domestic economic activity remains quite strong, despite increasing global and financial market pressures.
From the production side, the highest growth occurred in the accommodation and food services sector, which grew by 13.14%. From the expenditure side, the government consumption component recorded the highest growth at 21.81%.
Nevertheless, compared to the fourth quarter of 2025, the Indonesian economy experienced a quarterly contraction of 0.77%. This indicates that growth momentum still needs to be maintained, especially as interest rates begin to move higher and potentially hinder business expansion and public consumption.
- Inflation
Indonesian inflation remains within BI’s target range. In May 2026, inflation was recorded at 0.28% month-on-month. Annually, inflation stood at 3.08% year-on-year.
This figure remains within the inflation target of 2.5±1%. This means that in terms of goods and services prices, national inflationary pressure remains relatively controlled.
Core inflation is also well-maintained. In May 2026, core inflation was recorded at 0.22% month-on-month and 2.59% year-on-year. Core inflation is important to monitor as it reflects more fundamental price pressures, particularly from the side of public demand.
With inflation still under control, this BI interest rate hike appears to be more directed towards maintaining rupiah stability and anticipating future risks, rather than solely due to a current surge in domestic inflation.
- Rupiah Exchange Rate
The rupiah remains one of the primary reasons BI has chosen to tighten monetary policy. Pressure on the exchange rate has been quite significant recently, primarily due to global uncertainty caused by geopolitical conflicts in the Middle East, which has driven high demand for the US dollar.
In trading on Friday (19/6/202<0xA0>6), the rupiah weakened again to the position of Rp17,830/US$ at the market opening. This weakening occurred after, in the previous trading session on Thursday (18/6/2026), the rupiah had closed stronger by 0.17% at the level of Rp17,700/US$.
The current position of the rupiah is gradually starting to recover following a period of weakening that saw the exchange rate breach the Rp18,000/US$ mark and even hit an all-time low of Rp18,170/US$ at the close of trading on Monday (8/6/2026).
This movement shows that pressure on the rupiah has not yet fully subsided. The increase in the BI Rate is expected to help maintain the attractiveness of rupiah assets, curb foreign capital outflows, and dampen exchange rate volatility.
However, the challenge is significant. If US dollar pressure remains strong, the interest rate hike may not be immediately sufficient to bring the rupiah back to a consistent strengthening trend in the future.
- IDX Composite (IHSG)
Pressure is also felt in the stock market. The IDX Composite closed lower by 0.78% to 6,172.34 in trading on Thursday (18/6/2026), following BI’s decision to raise the BI Rate to 5.75%.
Compared to its peak this year, the pressure on the IDX Composite has been very deep. According to Refinitiv data, the IDX Composite briefly touched 9,134.70 on 20 January 2026. Compared to its position on 18 June 2026, the index has plummeted by approximately 32.4%. This is still much better compared to the lowest level of the IDX Composite in 2026, which touched the 5,300 range early last week.
Pressure on the IDX Composite comes not only from high interest rates but also from MSCI sentiment since the beginning of the year. In late January 2026, MSCI implemented a temporary or interim freeze on several changes to the Indonesian stock index, highlighting issues regarding free float transparency, share ownership structure, and indications of coordinated trading.
Market concerns increased as MSCI also opened the possibility of downgrading Indonesia from an Emerging Market to a Frontier Market if improvements in transparency are deemed inadequate.
In the June 2026 Global Market Accessibility Review, MSCI again provided notes regarding Indonesia, particularly on information flow criteria.