Economist projects improved economic growth in Q3 2026

Bank Danamon Indonesia chief economist Irman Faiz projects Indonesia’s economic growth in the third quarter of 2026 could improve compared to the previous quarter, primarily driven by accelerated government spending in the second half of the year. “In the third quarter, we are quite optimistic that economic growth will be better than the second quarter,” Faiz said during a media luncheon for Danamon’s 70th anniversary in Jakarta on Tuesday. According to him, second-quarter growth is estimated to have slowed slightly after the economy received a boost in the first quarter from several seasonal factors, including the Lebaran momentum and holiday allowance payments. The fiscal impulse in the second quarter is also estimated to be lower than the previous quarter, amid ongoing spending adjustments and the transition of several government priority programmes. However, Faiz believes there is room for growth to strengthen again in the second half because there remains a significant unspent government budget ceiling. “In the third and fourth quarters, we see that unspent funds are still quite large. If this is spent, it will provide another boost,” he said. He explained that the impact of government spending is not only recorded in the government consumption component but can also spill over into household consumption and investment. According to Irman, this spillover effect was already visible in the first quarter when fiscal stimulus helped drive consumption activity and capital formation. Statistics Indonesia recorded that the Indonesian economy grew 5.61 per cent year-on-year in the first quarter of 2026. On the expenditure side, government consumption recorded the highest growth at 21.81 per cent, while household consumption remained the main pillar of the national economy. During that period, gross domestic product at constant prices was recorded at Rp3,447.7 trillion, while at current prices it reached Rp6,187.2 trillion. Meanwhile, state spending realisation up to the first half of 2026 reached Rp1,656 trillion, or 43.1 per cent of the state budget target of Rp3,842.7 trillion. Based on Ministry of Finance data on 7 July 2026, central government spending was recorded at Rp1,298.6 trillion, or 41.2 per cent of the Rp3,149.7 trillion target, leaving considerable room for spending realisation in the second half. Faiz assessed that this spending acceleration must be accompanied by measured fiscal management so that its support for growth can proceed without disrupting the credibility of the state budget. He also stressed the importance of maintaining state revenue on target, as a weakening global economy or lower tax receipts could limit the government’s spending capacity. According to him, certainty of revenue realisation is needed so that the various stimuli announced by the government can be implemented in the second half and support economic growth throughout 2026. “The government needs to ensure tax collection and state revenue are in line with the new target so that spending to drive growth in the second half can continue smoothly,” Faiz said. In line with this projection, the government has prepared an economic stimulus package worth Rp26.34 trillion for the second half of 2026 to maintain public consumption and boost economic growth amid global uncertainty. The stimulus includes transport incentives, internship and vocational training programmes, food aid, and food price stabilisation support. The government is also targeting the acceleration of state spending realisation in the second half to serve as a driver of economic activity.