Analysts assess domestic economy as relatively stable amid global turbulence
The risk of slowdown is not too severe because domestic consumption and fiscal stimulus continue to serve as the main pillars, so the economy tends to slow moderately rather than experiencing a sharp decline.
Jakarta (ANTARA) - Associate Director of Research and Investment at Pilarmas Investindo Sekuritas, Maximilianus Nico Demus, assesses that Indonesia’s economic growth remains relatively stable, supported by domestic consumption and government fiscal stimulus.
He views the revisions to Indonesia’s economic growth projections by global institutions as primarily driven by external factors, particularly the rise in energy prices and geopolitical conflicts.
“Nevertheless, the risk of slowdown is not too deep because domestic consumption and fiscal stimulus remain the main supports, so the economy tends to slow moderately, not experiencing a sharp decline,” Nico stated in his comments in Jakarta on Monday.
Amid the ongoing conflict between the United States (US) and Iran, Nico said market participants will still be reluctant to enter risk assets, such as stocks, although opportunities remain open.
“The bond market may appear attractive, although market participants and investors are also awaiting the 10-year bond yield to be above 7 percent,” Nico added.
In agreement, stock market political economy analyst Kusfiardi assesses that current market conditions are not only influenced by domestic seasonal sentiment but also by supply shocks due to the US-Iran conflict.
“The closure of the Strait of Hormuz by Iran in response to tensions with the US-Israel has hit Indonesia right at its weak point, its dependence on fuel imports,” Kusfiardi stated.
Facing global uncertainty, Kusfiardi believes market participants will still adopt an ultra-defensive strategy, with actions including, first, sector selectivity to avoid sectors sensitive to energy costs and interest rates, such as property and automotive.
Second, focus on liquidity by shifting exposure to large-cap banking stocks with strong fundamentals and the telecommunications sector, which is more resilient to commodity volatility.
Third, hedging instruments by considering safe assets like gold as a hedge against exchange rate volatility.
“Indonesia’s economic fundamentals are still intact with growth around 5 percent, but the future market direction will very much depend on the international diplomatic response in the Strait of Hormuz and the government’s boldness in rearranging fiscal space amid soaring global energy prices,” Kusfiardi said.
On the other hand, Kusfiardi warns that every $1 increase in oil prices per barrel could add to the energy subsidy burden in the state budget by Rp10.3 trillion.
If Brent oil prices remain above $100 per barrel in the long term, the budget deficit is feared to exceed the safe limit of 3 percent of GDP.
He also warns of the risk of stagflation in the second quarter of 2026, indicated by slowing economic growth while inflation creeps up due to swelling logistics and energy costs.
“Bank Indonesia’s (BI) move to hold the BI Rate at 4.75 percent is a defensive effort to maintain rupiah stability, but room for monetary easing is now closed,” Kusfiardi stated.
Indonesia’s financial market movements in the first week after the Eid holiday (23-27 March 2026) showed a pattern of high volatility.
The Composite Stock Price Index (IHSG) closed at 7,097.057 on Friday’s trading (27/3), while the rupiah was held in the range of Rp16,850 - Rp16,997 per US dollar.
This pressure occurred alongside the surge in global crude oil prices touching above $100 per barrel due to distribution disruptions in the Strait of Hormuz, a route supplying 20 percent of global oil needs.