Still at 5%: Time to Change the Growth Engine
On 5 August 2026, Statistics Indonesia (BPS) recorded that the country’s economic growth for the second quarter of 2026 was 5.29% year-on-year, slowing from 5.61% in the first quarter. The economy appears resilient, but it has not been able to leap from the 5% range. The question is no longer whether 5% is good enough, but whether this figure is sufficient to propel Indonesia towards becoming a high-income country.
Amid a global slowdown, the performance of Indonesia’s main trading partners has been mixed. The United States, China, and Singapore slowed to 2.1%, 4.3%, and 5.7% respectively. Conversely, Malaysia and Vietnam saw increases to 5.8% and 8.4%. This reflects that the global slowdown is not the primary explanation for Indonesia’s stagnation. We must therefore examine whether the country’s growth engine is still operating in the same way.
As long as growth relies on domestic consumption, while productive investment, industrialisation, value-added exports, and productivity fail to accelerate sufficiently, the economy will remain stable but unable to leap forward. The 5.29% figure demonstrates that the national economy is resilient, but strategically, it shows that Indonesia is still moving along the same trajectory, merely surviving rather than making a growth leap.
This is what I have previously called the 5% trap. It is not that 5% is a bad figure, but rather that it is a comfortable one. This figure is enough to maintain fiscal stability, control inflation, retain investor confidence, and even gain recognition from international institutions. However, the history of development shows that no country has successfully escaped the middle-income group by being satisfied with stability alone. Countries that have made the leap, such as South Korea, China, Vietnam, and Ireland, never made stability the finish line. They used stability as a foundation to transform their economic structures, and this is precisely the challenge facing Indonesia.
BPS data reflects that growth is driven by domestic consumption, the payment of the 13th salary, increased digital transactions, household spending, trade activities, and various government stimuli. This means the Indonesian economic engine is still operating on an old pattern. Consumption keeps the economy moving, but it has never been the engine that brings a nation a leap in productivity. Developed nations are built by investment, accelerated by innovation, and sustained by productivity. As long as productive investment does not grow much faster than consumption, manufacturing does not become the main locomotive of exports, and labour productivity does not increase significantly, the Indonesian economy will continue to circle within the same corridor, appearing stable but unable to accelerate.
This is the aspect often missed in public debate. Our economic discussions frequently get trapped in a simple question: has the government succeeded or failed? In reality, economic transformation is not a one-off job. It is a process of building foundations and then orchestrating various policies to produce mutually reinforcing effects. The current administration has begun building these foundations through eight clusters of National Priority Programmes, with productivity, investment, and industrialisation as the main directions. The Free Nutritious Meal programme is not merely a social initiative but an investment in the quality of Indonesia’s human capital for the next five to ten years. Simultaneously, this programme creates demand for farmers, livestock breeders, food SMEs, and the logistics sector. The Merah Putih Village Cooperatives are not just village institutions but instruments to shorten distribution chains and reduce economic costs. The three-million-house programme does not only build homes but also stimulates the cement, steel, ceramics, furniture, construction, and labour sectors. Similarly, downstreaming is not just about building smelters but serves as an entry point for industrialisation and domestic value creation.
Thus, the policy direction is moving onto the right track. The challenge now is no longer merely setting the direction but accelerating the orchestration so that all these programmes truly become a national growth engine. The Free Nutritious Meal programme must be connected to modern agriculture; agriculture to the food industry; the food industry to exports; exports to new investment; and investment to increased labour productivity. Without this value chain, each programme produces its own benefits but does not form a national growth engine. The state does not have to be the operator of all economic projects. The state must be the conductor, ensuring that all economic instruments play the same symphony.