LPEM UI Projects 5.4% Economic Growth in Q1 2026

The Institute for Economic and Social Research at the University of Indonesia’s Faculty of Economics and Business (LPEM FEB UI) projects Indonesia’s economy to grow by 5.48% year-on-year in the first quarter of 2026. LPEM UI also predicts overall economic growth for Indonesia to reach 5.15% for the year.

“In the midst of 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,” said LPEM UI researcher Jahen F. Rezki in the Indonesia Economic Outlook Q2-2026 report.

In addition, Jahen stated that the disbursement of holiday allowances (THR) will also boost household net income. According to him, the combination of these various factors, plus the low-base effect from Gross Domestic Product growth in Q1 2025, means that economic growth in the first quarter of 2026 is estimated to be quite high. GDP growth in Q1 2025 was recorded at 4.87%.

Nevertheless, LPEM UI assesses that medium-term economic growth prospects require caution. This is because ongoing geopolitical fragmentation, particularly stemming from global trade tensions and tariff uncertainties, poses downside risks to export-oriented sectors and investor confidence.

Moreover, Jahen said that domestically, the worsening trend in fiscal balance—exacerbated by pressures from rising oil prices on subsidy burdens—remains the primary vulnerability.

There are three indicators of concern: the government’s willingness to reallocate spending to more productive positions and the financial sector’s ability to sustain credit expansion without deteriorating asset quality. Thirdly, whether consumer purchasing power can be maintained sustainably amid pressures from rising energy prices.

Therefore, LPEM UI predicts Indonesia’s economy will grow by 5.15% year-on-year in 2026. “Without meaningful improvements in those aspects, growth risks remaining at the lower end of the 5% range,” said Jahen.