AMRO Projects Indonesia's Economy to Grow 5% in 2026

The ASEAN+3 Macroeconomic Research Office (AMRO) estimates Indonesia’s economic growth will reach 5% this year and 5.1% in 2026. This was revealed in the July 2026 edition of the Quarterly Update ASEAN+3 Regional Economic Outlook (AREO). Indonesia’s inflation is expected to rise to 3.4% in 2026 before easing to 3% in 2027. “The outlook remains fraught with significant uncertainty. The most prominent risks stem from the evolving Middle East conflict and the resilience of the AI-based technology cycle, both of which could materially alter the region’s growth,” the AMRO report stated. AMRO also projected economic growth for the ASEAN+3 region at 4.1% in 2026, higher than the June projection of 4.0%, before moderating slightly to 4.0% in 2027. Meanwhile, headline inflation is forecast at 1.6% in 2026, down from the previous projection of 1.8%, in line with assumptions of lower global commodity prices. According to the AMRO report, the upward revision in ASEAN+3 growth projections reflects the continued momentum of the region’s technology sector, particularly strong demand for semiconductors and various artificial intelligence (AI)-related products, as well as improved global commodity price prospects. AMRO further noted that solid household consumption, resilient investment, and strong exports of semiconductors and electronic products are expected to continue driving economic growth. Disruptions to energy and industrial raw material supplies also proved less severe than initially feared, allowing manufacturing activity to continue expanding. “ASEAN+3 continues to demonstrate strong resilience, supported by solid domestic demand and its central role in the global AI supply chain,” said AMRO Chief Economist Dong He. “The impact of the Middle East conflict has also been milder than initial estimates, although high energy and commodity costs remain a risk to inflation and industrial activity,” he added. Inflationary pressures remain generally contained, with price increases mainly occurring in the energy and transportation sectors. Meanwhile, core inflation has seen only a limited rise. However, food inflation has the potential to increase as high production costs and unfavourable weather conditions begin to be passed on to consumer prices. AMRO noted that the region’s economic outlook is still overshadowed by considerable uncertainty. A re-escalation of the Middle East conflict could drive up energy, shipping, and food costs. On the other hand, weaker-than-expected technology demand could pressure the region’s exports and investment. Given the importance of AI-related demand to the region’s economic prospects, even a moderate slowdown in global technology investment—returning to 2024 growth rates—could lower ASEAN+3 economic growth to just 2.5% in 2027. That figure would be the lowest growth rate since the Asian Financial Crisis, excluding the pandemic period. Financial market volatility and rising trade protectionism also have the potential to exert additional pressure on the region’s economic outlook. “The wide range of possible outcomes underscores the importance of sustained vigilance and sound macroeconomic policies,” He added. According to him, policymakers need to respond flexibly to differing domestic conditions and rapidly evolving external risks, particularly regarding the AI cycle and the Middle East conflict.