BI: Global Economic Prospects for 2026 Remain Weak, Financial Market Uncertainty High
Bank Indonesia (BI) assesses that global economic prospects in 2026 continue to face pressure. World economic growth is expected to remain weak, while uncertainty in global financial markets remains at a high level.
Acting Governor of BI Destry Damayanti said these conditions are influenced, among other things, by the escalation of war in the Middle East, which has again driven up oil prices and a number of global commodities.
“World economic growth in 2026 is not yet strong, estimated at around 3%,” said Destry at a press conference following the BI Board of Governors Meeting for August 2026 in Jakarta on Wednesday (19/8).
According to Destry, global inflationary pressure also remains high and is projected to reach around 4.5% in 2026. This situation could prompt central banks in various countries to maintain or tighten their monetary policies.
One area of concern is US interest rate policy. BI expects the US benchmark interest rate, or Fed Funds Rate, to potentially increase in the fourth quarter of 2026.
At the same time, US Treasury yields are expected to remain high. This movement is driven by rising expectations of a Fed Funds Rate increase and the still-wide US budget deficit.
Destry explained that continued uncertainty in global financial markets is holding back global investor interest in placing funds in portfolio instruments in emerging market countries.
This situation has also kept the US dollar index strong, both against developed country currencies as reflected in the DXY and against developing country currencies through the ADXY index.
In response to these external conditions, BI considers it necessary to strengthen coordination between fiscal and monetary policy. This synergy is important to enhance external resilience, maintain economic stability, and support national economic growth.
Amid global economic pressure, Indonesia’s domestic economic performance is considered to remain well maintained. BI sees the need to continue strengthening growth momentum so that national economic expansion continues.
Indonesia’s economy grew 5.29% year-on-year in the second quarter of 2026. This figure continued the growth recorded in the first quarter of 2026, which reached 5.61% year-on-year.
Economic growth in the second quarter of 2026 was mainly supported by government fiscal stimulus. These policies drove an increase in government consumption and investment.
Government consumption remained high, supported by increased personnel spending, including the payment of the 13th salary. Spending on goods and services related to the implementation of the Free Nutritious Meals programme also contributed.
Meanwhile, household consumption continued to show positive performance. BI considers that this component needs to be further strengthened, particularly by capitalising on the momentum of government fiscal stimulus.
Export performance is also a sector that needs to be improved. Strengthening exports is considered important to make Indonesia’s economic growth structure more robust.
“Going forward, economic growth is expected to remain favourable, supported by the implementation of various government stimulus programmes and maintained confidence among economic actors,” said Destry.
BI stated that it will continue to strengthen its policy mix through monetary, macroprudential, and payment system instruments. These policies will continue to be synergised with government measures to maintain stability while strengthening economic growth.
“Bank Indonesia estimates Indonesia’s economic growth in 2026 to be in the range of 4.9% to 5.7%,” said Destry.