Indonesia Shines Amid a Dark World
The first three months of 2026 should have been a severe test for Indonesia’s economy. US reciprocal tariffs, the outflow of foreign capital, and exchange rate volatility pressured nearly all developing countries in the region. The pressure was real, but the results were surprising. BPS recorded Indonesia’s economic growth at 5.61% year-on-year for the first quarter of 2026, exceeding economists’ consensus expectations of only 5.3%, and marking the highest first-quarter growth in the last 13 years. This figure is no coincidence. It is the result of consistent policy choices: relying on domestic strengths when external trade is under pressure. Household consumption grew by 5.52% and contributed 54.36% to GDP. Investment, reflected in Gross Fixed Capital Formation (PMTB), grew solidly by 5.96%. However, the component that most determined the colour of this growth was government consumption, which surged by 21.81%, the highest among all expenditure components. Such a large increase in government consumption naturally raises a fundamental question: where did all that spending go? The Free Nutritious Meals (MBG) programme and the strengthening of Village/Sub-district Red and White Cooperatives (KDKMP) are the two most concrete answers. MBG is not just a nutrition programme; it is a new demand engine that drives farmers, livestock breeders, logistics, and food SMEs across all regions. BPS noted that the accommodation and food and beverage provision sector grew the highest in the first quarter of 2026, reaching 13.14%, partly driven by MBG supply chain activities. The results are evident from the open unemployment rate dropping to 4.68% in February 2026, from 147.67 million people in working status. However, expanding such a programme is only meaningful if carried out within a healthy fiscal corridor. The government remains committed to keeping the state budget deficit below 3% of GDP, while Bank Indonesia maintains the BI rate at 4.75% to provide room for credit and consumption without triggering excessive inflation.