Economists Forecast 'Strong' Economic Growth for Indonesia in Q1, Here Are the Drivers!

The Central Statistics Agency (BPS) will announce Indonesia’s economic growth data for the first quarter of 2026 on Tuesday (5/5/2026). This data is crucial for assessing the resilience of the nation’s economy against global shocks at the start of the year.

The government estimates that economic growth in the first quarter of 2026 will reach 5.5%, supported by the impact of the Eid al-Fitr holidays, consumption during Ramadan, and government policy packages.

Based on a consensus gathered by CNBC Indonesia from 12 institutions, Indonesia’s economic growth is projected to reach 5.40% year-on-year (yoy). However, on a quarterly basis, the economy is expected to contract by 1.0% compared to the previous quarter (quarter-to-quarter, qtq).

If this consensus holds true, first-quarter 2026 growth would be the highest since the third quarter of 2022 (5.73%).

Economist from Global Markets Maybank Indonesia, Myrdal Gunarto, assesses that economic growth in the first quarter of 2026 will reach 5.37%. According to Myrdal, this growth is slightly down from the fourth quarter of the previous year, which reached 5.39%. However, he adds that the magnitude of this growth remains high. Consumption, says Myrdal, continues to be the main driving factor.

“Due to the effect known as major holidays or religious observances. You see, there are many moments from Eid, fasting, or even Chinese New Year. So that’s what drives high consumption,” he told CNBC Indonesia, quoted on Tuesday (5/5/2026).

“This is also supported by liquidity assistance to the public, which is quite supportive in this first-quarter period. Whether in the form of holiday bonuses (THR), or salary increases. For civil servants, it’s the same, THR as well,” he added.

On the other hand, Myrdal sees government spending also accelerating, with higher realisation compared to last year.

“So that’s what makes the economic growth side still quite aggressive in this first quarter,” he said.

From the export side, in the first quarter of 2026, global demand has not yet been disrupted by the outbreak of war in the Middle East, so its contribution to economic growth remains unaffected.

For the second quarter of 2026, Myrdal is concerned that Indonesia’s economy will experience a slowdown. According to Myrdal, this period has fewer special moments, such as Eid. Meanwhile, government spending is starting to be directed towards priority development programmes.

Even though it slows, Myrdal still believes Indonesia’s economy in the second quarter of 2026 will remain around 5%. This is because the government has not yet raised prices of subsidised fuels. The price of 3 kg LPG and the basic electricity tariff have also not changed.

“So that’s why we project the economy to still grow above 5% up to the second quarter. Because consumption remains strong. Pertalite and diesel prices are the same, LPG too,” he said.

“We see that for the second quarter, it should still be able to grow 5.31%,” he emphasised.

From the export side, Myrdal assesses that the impact of rising global commodity prices will affect Indonesia’s output or production.

“Sectorally, we see sectors like transportation, then retail trade, agriculture, or services still growing strongly in the second quarter. So we project the second quarter to grow at 5.31%,” said Myrdal.

The Institute for Economic and Social Research (LPEM) of the Faculty of Economics and Business at the University of Indonesia estimates GDP growth in the first quarter of 2026 at 5.48%. This projection is still within the estimate range of 5.46%-5.50%. For the full year, LPEM estimates Indonesia’s economy will grow by 5.15%.

In its latest report compiled by LPEM UI researchers Jahen F. Rezki, Teuku Riefky, and others, the institution reveals that amid ongoing external and internal pressures, Indonesia’s economy is expected to benefit from seasonal factors in Q1 2026 following the Ramadan and Eid al-Fitr periods. Furthermore, the disbursement of holiday allowances (THR) also boosts household net income.

“The combination of these various factors with the low-base effect from GDP growth in Q1 2025 means economic growth in the first quarter of 2026 is estimated to be quite high. Thus, Indonesia’s economy is estimated to grow by 5.48% (y.o.y) in Q1 2026,” stated LPEM.

However, for the full year, LPEM UI warns of risks from prolonged Middle East conflicts and deteriorating fiscal capacity that could pressure Indonesia’s economic growth going forward. Therefore, LPEM UI estimates Indonesia’s economic growth will be in the range of 5.1%-5.2% this year.

“We view that Indonesia’s economy will grow by 5.15% (yoy) for FY2026 (estimate range from 5.1% to 5.2%) due to prolonged Middle East conflicts and risks of deteriorating fiscal capacity,” wrote LPEM.

Head of Economics at PT Bank Mandiri Tbk, Andry Asmoro, estimates that Indonesia’s GDP will increase by 5.47% (yoy) in the first quarter of 2026, up from 5.39% (yoy) in the fourth quarter of 2025, supported by stronger domestic demand, particularly from government expenditure, investment, and seasonal consumption related to Ramadan.

“This higher growth is also driven by the low-base effect, after slower growth of 4.87% yoy in the first quarter of 2025, when the government implemented expenditure reallocation,” he emphasised.

Supporting this high growth, Andry estimates household consumption will remain resilient at 5.2% (yoy) in the first quarter of 2026, higher than 5.1% (yoy) in the fourth quarter of 2025.

“This is supported by stronger consumption indicators, with average retail sales growth reaching around 5.7% (yoy) in the first quarter of 2026 from 4.7% (yoy) in the fourth quarter of 2025,” he said.