Airlangga: Three macro indicators reflect solid Indonesian economy

Coordinating Minister for Economic Affairs Airlangga Hartarto assessed that three macroeconomic indicators released on Monday (3/8) reflect the solid performance of the Indonesian economy. The three indicators are July 2026 inflation, the Manufacturing Purchasing Managers’ Index (PMI) for July 2026, and the trade balance performance for June 2026.

“The government is committed to maintaining a balance between price stability and economic growth. Food security, energy security, and inflation control are the main foundations for preserving people’s purchasing power, increasing business confidence, and strengthening national economic competitiveness,” Airlangga said in a statement in Jakarta on Tuesday.

Indonesia’s inflation in July 2026 was recorded at 2.88 per cent year-on-year (yoy), down from 3.34 per cent in June 2026 and remaining within the target range of 2.5 per cent plus or minus 1 per cent. The easing of inflationary pressures was mainly driven by a decline in the prices of several strategic food commodities, such as shallots, tomatoes, purebred chicken eggs, and bird’s eye chillies, amid increased production in several production centres. Meanwhile, core inflation was maintained at 2.76 per cent (yoy), while administered prices (AP) inflation was recorded at 3.58 per cent (yoy), primarily influenced by the base effect of non-subsidised fuel price adjustments in June 2026 and an increase in air transport tariffs.

Airlangga said the government continues to strengthen inflation control through synergy between the central government, Bank Indonesia, and regional governments within the framework of the Central Inflation Control Team (TPIP) and Regional Inflation Control Teams (TPID). These efforts include the Cheap Food Movement (GPM), Stabilisation of Food Supply and Prices (SPHP), optimisation of inter-regional distribution, strengthening of the Government Rice Reserves (CBP), and inter-regional cooperation. The government is also enhancing food security by increasing agricultural productivity, rehabilitating irrigation networks, optimising agricultural land, providing fertilisers and seeds, agricultural mechanisation, and strengthening food logistics infrastructure.

“In implementing this strategy, financing support is also provided through the People’s Business Credit (KUR) scheme with a realisation of Rp198.9 trillion as of 28 July 2026 from a distributed ceiling of Rp290.59 trillion, with the agricultural sector realisation accounting for around 38 per cent,” explained Airlangga. In addition, the government launched the Agricultural Business Credit as a reform of the Agricultural Machinery Business Credit scheme to support productivity, downstreaming, self-sufficiency, and food security.

In the energy sector, the government is strengthening energy security by increasing oil and gas lifting, accelerating the development of new and renewable energy, implementing the biodiesel programme, building energy infrastructure, and downstreaming minerals and natural resources. The implementation of the mandatory B50 biodiesel programme since 1 July 2026 continues to be strengthened to support energy self-sufficiency. This policy, along with restrictions on crude oil exports to secure domestic refinery supply, is directed at saving foreign exchange and reducing dependence on energy imports.

Furthermore, Indonesia’s trade balance recorded a cumulative surplus of USD 3.58 billion during January-June 2026. This surplus was supported by a non-oil and gas surplus of USD 19.35 billion, while the oil and gas deficit was recorded at USD 15.77 billion. In June 2026, the trade deficit narrowed by 72.04 per cent month-to-month (mom) to USD 450 million from USD 1.61 billion in May 2026. The improvement was supported by an increase in the non-oil and gas surplus to USD 3.04 billion from USD 2.15 billion, as well as a narrowing of the oil and gas deficit to USD 3.49 billion from USD 3.75 billion.

Non-oil and gas trade performance was also supported by key commodities. Exports of CPO and its derivatives increased by 7.32 per cent to USD 12.33 billion, while the processing industry sector became the main contributor to export growth at 6.18 per cent. On the import side, the import structure was still dominated by raw materials/auxiliary goods worth USD 97.95 billion and capital goods worth USD 27.36 billion. Both accounted for 91.3 per cent of total imports, while consumer goods accounted for 8.7 per cent. The increase in imports of machinery and mechanical equipment by 17.43 per cent and electrical machinery and equipment by 19.63 per cent indicates strengthening domestic production and investment activity.

Meanwhile, Indonesia’s Manufacturing PMI returned to expansionary territory in July 2026 at a level of 50.2, up from 46.9 in June 2026. The increase was driven by strengthening new orders, which also boosted output for the first time since February 2026. “Companies even started adding workers for the first time in five months, responding to recovering orders. The rise in backlogs to the fastest pace since November 2025 confirms strengthening demand, while gradually improving supply chains also helped strengthen the domestic manufacturing sector. This strengthening is in line with the ASEAN Manufacturing PMI, which rose to 52.8 from 50.5,” said the Coordinating Minister. Business optimism is also at its highest level since January 2026. Although export demand remains weak and cost pressures have not fully subsided, the direction of manufacturing sector recovery is considered to be taking shape.

Airlangga said the sustainability of the recovery will depend on strengthening demand and easing cost pressures and supply chain disruptions. “Overall, controlled inflation, the return of manufacturing to the expansion zone, and the narrowing trade deficit are strong signals that the Indonesian economy is moving in an increasingly positive direction. The government will continue to oversee the sustainability of this trend through an anticipatory and responsive policy mix so that people’s purchasing power is maintained, industry becomes more competitive, and the national economic outlook remains bright,” he concluded.