Growing Economy, Weakening Rupiah: INDEF Highlights Quality of Growth
The Head of the Center of Macroeconomics and Finance at INDEF, Rizal Taufikurrahman, stated that Indonesia’s 5.61% economic growth in the first quarter of 2026 appears strong on a macroeconomic level. However, he added, the financial markets are sending a different signal through the rupiah’s weakening to nearly Rp17,400 per US dollar.
“This shows that the market is not only looking at the headline growth figure but also paying attention to the quality and sustainability of that growth,” Rizal said when contacted by Republika in Jakarta on Wednesday (6/5/2026).
In many cases, Rizal said, growth that is overly supported by fiscal stimulus or very high government spending and short-term consumption is not necessarily accompanied by strengthening external fundamentals or investor confidence. Upon closer examination, Rizal continued, the structure of first-quarter 2026 growth is still dominated by household consumption and government consumption.
“Particularly the seasonal effects of Ramadan-Idul Fitri, accelerated state spending, and social programmes such as MBG,” Rizal added.
Meanwhile, he said, external pressures are increasing. Rizal noted that global oil prices remain above US$100 per barrel, thereby increasing the burden of energy imports and subsidy risks. At the same time, Rizal continued, foreign ownership of SBN has continued to decline over the past year, SBN yields tend to rise, and pressure on the state budget is beginning to show with a deficit reaching around 0.93% of GDP as of March 2026.
“This means the market is reading greater fiscal and external risks compared to optimism about domestic growth,” he added.
In addition, Rizal indicated that the growth does not fully reflect strengthening in productive sectors. He said Indonesia’s manufacturing Purchasing Managers’ Index (PMI) in April 2026 has returned to contraction territory, investment has not surged aggressively, and middle-class purchasing power remains constrained due to cost-of-living pressures and high interest rates.
“So economically, this situation is not entirely odd, but it shows a disconnect between statistical growth and market perceptions as well as real conditions on the ground,” Rizal said.
Rizal said this needs to be a concern for the government. He noted that exchange rate stability is ultimately heavily influenced by fiscal credibility, external resilience, and investor confidence in the future direction of the economy.