Economist: Vietnam Upgraded, Indonesia's PMI Falls into Danger Zone

Economist Didik J. Rachbini from the Institute for Development of Economics and Finance (Indef) highlighted the stark contrast between the economic trajectories of Vietnam and Indonesia. While Vietnam has been upgraded to an upper-middle-income country, Indonesia’s manufacturing sector is showing signs of severe distress. “The overall state of the Indonesian economy can be predicted or even captured from just one indicator, namely the declining PMI data. This PMI figure indicates that our industrial sector has been ailing for a long time and has now entered a red danger zone with an index level below 50 percent,” Didik stated in Jakarta. He noted that although the Indonesian economy grew by 5.61 percent in the first quarter of 2026, the government’s support for the industrial sector has weakened. This is evidenced by the S&P Global PMI data, which recorded Indonesia’s manufacturing PMI at 46.9 in June 2026. “Indonesia’s industrial sector has long been adrift without clear policy footing. The manufacturing PMI data falling into contraction zone is a result of absent policies for the industry and investment,” he explained. Didik added that the business world is also facing cost pressures due to global geopolitical factors and domestic issues, and that investment will not flow without clear policies and a reduction in bureaucratic red tape. He further noted that declining public purchasing power is a consequence of the shrinking industrial sector and the economy’s inability to provide productive employment opportunities. In comparison, Didik pointed to Vietnam’s success, where the economy grew by 8 percent, driven by an industrial sector developed over the last two to three decades. He said Vietnam’s transformation into an upper-middle-income country, with a gross national income per capita of approximately 4,970 US dollars, surpassing the 4,636 US dollar threshold, was a direct result of its investment-friendly and pro-industry policies.