Demonstrations, Deficit, and the Delusion of Growth
When the Central Statistics Agency (BPS) announced that the Indonesian economy grew by 5.61% in Q1 2026, the government had reason to be satisfied. However, only a few weeks later, students took to the streets in various cities on Friday (15/6/2026). For some, these two events appear contradictory. How can an economy growing above 5% be accompanied by rising social unrest?
In reality, there is no contradiction; rather, there is a clash between two ways of reading economic reality. The government reads the economy through statistics. Students read it through daily experience. Statistics see growth. The public sees rising food prices, quality jobs becoming harder to find, a rupiah vulnerable to global shocks, and various government programmes requiring increasingly large fiscal financing. Therefore, what is being questioned is not merely the growth figure, but the quality and sustainability of that growth itself.
This is where the World Bank’s Indonesia Economic Prospects 2026 report, launched in June 2026, becomes relevant. Unlike the optimism that usually accompanies the publication of growth figures, the World Bank instead raised the theme of Managing Risks, Unlocking Productivity. Its message is simple but fundamental: Indonesia cannot continue to rely on consumption and government spending as the main engines of economic growth. Ultimately, a nation’s progress is determined not by how much money is spent, but by how much productivity is created.
Paradoxically, BPS data shows that the 5.61% growth was heavily dependent on consumptive factors. Household consumption was the largest contributor to growth. Meanwhile, government consumption surged by 21.81% compared to the same period the previous year. This included the payment of holiday bonuses and 14th-month salaries, the appointment of new civil servants, increased government spending on goods and services, and the implementation of the Free Nutritious Meal Programme (MBG). Of the total 5.61% economic growth, government consumption contributed around 1.26 percentage points. Assuming MBG contributed around 30-50% to that increase, the programme accounted for approximately 0.4–0.6 points of national economic growth. In other words, without MBG, economic growth might have been in the range of 5.0–5.2%.
In the short term, there is nothing wrong with this mechanism. When the government spends money, demand increases. When demand increases, production rises. When production rises, economic growth goes up. This is the classic Keynesian recipe used for decades by many countries to prevent economic slowdowns. However, the problem does not end with the creation of growth. The more important issue is the source of financing for that growth.
From this description, we enter the issue of the deficit as the main concern. Growth driven by government spending expansion always carries fiscal consequences. Every additional expenditure not matched by increased revenue will narrow the state’s fiscal space in the future. The World Bank has reminded that Indonesia’s revenue ratio is still relatively low compared to its ever-increasing development needs. At the same time, various government priority programmes require ever-larger budgets. Therefore, the relevant question is no longer how much money the state spends, but what is produced by every rupiah spent.
The students taking to the streets are not merely debating MBG. They are worried about the possibility of Indonesia becoming increasingly dependent on the state budget to create economic growth. That concern stems from a simple question: if today’s growth is bought with ever-increasing spending, who will pay the bill in the future?
In development economics, a deficit is not a sin. Almost all developed countries have used deficits to build infrastructure, improve human quality, and accelerate industrialisation. The issue is not the existence of a deficit, but the quality of that deficit. A deficit used to finance productive investment will create new economic capacity that eventually pays for itself. Conversely, a deficit that mostly supports consumption will produce momentary growth without enlarging the economy’s ability to generate income in the future.
At this point, the students’ criticism, the World Bank’s warning, and Simatupang’s views essentially converge. The students speak about fiscal risk, the World Bank speaks about productivity, while Simatupang speaks about economic transformation. All three are discussing the same problem from different angles: how to prevent Indonesia from being trapped in growth that looks high on paper but is not productive enough to sustain itself.
In this context, the debate about MBG often misses the target. The public is trapped in a binary choice between supporting or rejecting it. The far more important question is whether the programme can deliver productivity gains commensurate with its fiscal cost. If MBG merely generates consumption, it is an expense. But if MBG succeeds in improving health, learning quality, and the cognitive capacity of Indonesia’s young generation, then it is an investment in human resources whose returns will only be visible one or two decades from now. The real debate is not whether to support or reject MBG. The real debate is whether Indonesia is using its fiscal space to build future productivity or merely buying growth.