Don't Lose Momentum on Economic Acceleration

Indonesia’s economy grew by 5.29% year-on-year (yoy) in the second quarter of 2026, higher than the 5.12% growth recorded in the same period the previous year. Head of Statistics Indonesia (BPS) Amalia Adininggar Widyasanti stated that this achievement indicates an acceleration momentum that must be maintained through collaboration among all parties. “This momentum is important to maintain confidence in the Indonesian economy. The public, government, and private sector must work together to capitalise on this economic growth acceleration,” she said. From the expenditure side, growth in the second quarter of 2026 was primarily supported by household consumption, investment, and government consumption. Household consumption grew solidly by 5.06% and accounted for around 53% of Gross Domestic Product (GDP), making it the largest contributor to economic growth from the expenditure side. Investment also recorded strong growth of 6.9%, contributing approximately 2.0 percentage points to economic growth with a share of around 29% of GDP. Meanwhile, government consumption accelerated with growth of nearly 16%, contributing around 1.07 percentage points to economic growth in the second quarter of 2026. The 5.29% growth figure also exceeded market consensus. Amalia explained that BPS uses thousands of indicators to calculate GDP, and the achievement reflects various economic activities during the period. A key factor was the maintained purchasing power of the public, with household consumption growth of 5.06% being higher than the same period the previous year. The acceleration of government spending realisation was another major factor. The 15.97% yoy growth in government consumption expenditure contributed 1.07 percentage points to the national economic growth. Amalia noted that this significant contribution demonstrates the important role of accelerated state budget realisation in driving economic growth. All government programmes using state budget funds are reflected in GDP components, either as government consumption or investment. Personnel and goods expenditure, including the 13th-month salary payments for civil servants (ASN), military (TNI), and police (Polri) disbursed in June 2026, are recorded as government consumption. Capital expenditure is recorded under the investment or Gross Fixed Capital Formation (PMTB) component. The high growth in government consumption for two consecutive quarters is linked to a change in the pattern of state spending realisation this year, with a deliberate effort by the government to accelerate spending compared to the previous year. Coordinating Minister for Economic Affairs Airlangga Hartarto stated that amidst global pressures, the first semester 2026 economic growth of 5.45% (c-to-c) is the highest first-semester achievement in the last five years and marks five consecutive quarters of growth above 5%. “Amidst significant global pressures, the Indonesian economy continues to grow strongly and consistently above 5%. This shows our domestic economic foundation is solid and the government’s policies are effective,” he said. Spatially, all regions in Indonesia recorded positive growth. The Bali and Nusa Tenggara region was the fastest growing at 6.10%, supported by the recovery of the tourism sector. Java remained the backbone of the national economy with 5.65% growth and a 56.47% contribution to GDP. The economic growth also delivered tangible benefits, with the number of people living in poverty falling to 22.93 million in March 2026, a reduction of 0.43 million from September 2025, bringing the poverty rate down to a record low of 8.07%. Bank Permata Chief Economist Josua Pardede projected that economic growth in 2026 will remain resilient compared to 2025, supported by domestic demand and the government’s expansionary fiscal policy. Bank Permata forecasts growth will be maintained at around 5.26% in 2026, up from 5.11% in 2025. Amidst high global energy prices due to prolonged geopolitical tensions in the Middle East, the government’s decision to maintain subsidised energy prices has helped keep inflation under control.