Can Indonesia Sustain 5.61% Growth and Reach the 8% Target?

Can Indonesia Sustain 5.61% Growth and Reach the 8% Target?

Jakarta. Indonesia’s first-quarter economic growth of 5.61%, according to data released by the Central Statistics Agency (BPS), may have exceeded expectations, but economists warned the figure is still far from the government’s ambitious 8% target and unlikely to be sustained without deeper structural reforms.

A recent Indonesia Economic Outlook report by Social and Economic Research Institute (LPEM FEB UI) projected Indonesia’s economy to grow 5.15% in full-year 2026, with a forecast range of 5.1-5.2%, despite estimating first-quarter growth at 5.48%.

Economist Titik Anas said the stronger first-quarter figure partly reflected a low base effect and cautioned against overly optimistic expectations.

“The 8% target is quite far from 5%,” Titik said, responding to a question from the Jakarta Globe. “We still have a lot of homework to do to reach growth above 5%.”

Additionally, International Economic Association (IEA) Secretary General Lili Yan Ing urged policymakers to remain realistic and focus on improving investment and export competitiveness.

“Let’s be realistic,” Lili said. “To achieve more than 5% growth, we need to work hard on investment and exports as key growth drivers.”

She noted that Indonesia still relies heavily on household consumption, which contributes around 50-55% of GDP, limiting the economy’s ability to achieve faster and more sustainable expansion.

“To boost growth beyond 5%, we need comprehensive reforms, simplifying regulations, improving export-import licensing, streamlining investment procedures, and addressing local content requirements,” she said.

Lili also emphasized the importance of prudent fiscal management and long-term investment in education and human capital to attract more investment.

The LPEM report said Indonesia is facing mounting pressures from both external and domestic factors, including escalating geopolitical tensions in the Middle East, rising global energy prices, rupiah depreciation, and concerns over fiscal sustainability.

The report also highlighted growing fiscal pressure from the government’s flagship programs, including the free meal program (MBG) and rural cooperative initiative, while warning that policy uncertainty and concerns surrounding sovereign wealth fund Danantara have contributed to financial market turbulence.

“Indonesia’s economy grew 5.39% in the fourth quarter of 2025, bringing full-year growth to 5.11%, supported by year-end seasonal demand and government stimulus measures, including transport discounts, cash transfers, VAT incentives, and subsidized loans for small businesses,” the report said.

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