LPEM UI predicts Indonesia's economy to grow 5.4% in Q1 2026

Jakarta (ANTARA) - The Institute for Economic and Social Research (LPEM) of the Faculty of Economics and Business (FEB) at the University of Indonesia (UI) predicts national economic growth to reach 5.48% (year-on-year/yoy) in the first quarter of 2026.

“GDP growth in the first quarter of 2026 is projected at 5.48% (yoy) with an estimation range of 5.46% to 5.5%,” said LPEM UI researcher Jahen F. Rezki in the Indonesia Economic Outlook Q2-2026 report in Jakarta on Friday.

Price pressures are expected to increase significantly in the first quarter of 2026, as reflected in general inflation exceeding Bank Indonesia’s (BI) target range, with the last level at 3.47% (yoy) in March.

This surge is primarily driven by the low-base effect of electricity tariff subsidies.

However, investment activity in Q1 2026 is projected to reach Rp498.7 trillion, equivalent to 24.4% of the annual target and growing 7.2% (yoy).

The trade balance is also expected to continue its surplus trend for 70 months in February 2026.

In addition, other driving factors in Q1 2026 include seasonal factors from Ramadan and Eid al-Fitr. LPEM UI states that these seasonal factors benefit Indonesia amid ongoing external and internal pressures.

The disbursement of holiday allowances (THR) is also estimated to boost household net income.

The combination of these various factors, along with the low base effect from Q1 2025 GDP growth, is expected to result in relatively high economic growth in Q1 2026.

However, in the medium term, the national economic outlook is assessed to require caution.

For the full year, LPEM UI estimates national economic growth at 5.15% (yoy), with an estimation range of 5.1% to 5.2%.

Nevertheless, LPEM UI highlights that national economic performance will still be influenced by pressures from the Middle East conflict.

The government is recommended to reallocate spending to more productive positions that can encourage the business climate and investment, urge the financial sector to maintain credit expansion without pressuring asset quality, and sustain household purchasing power amid energy price pressures.

“Without significant improvements in these aspects, growth risks remaining at the lower bound of the 5% range,” said the LPEM UI researcher.