This Week in the Indonesian Economy (15-21 Feb 2026)
The week of 15 to 21 February 2026 will be remembered as one of the most consequential in recent economic memory, defined above all by a sweeping trade and investment package concluded in Washington D.C. that could reshape Indonesia's resource landscape for decades to come -- even as the capital itself was submerged under more than a metre of floodwater and the country braced for the largest Lebaran exodus in its history.
**The Washington Windfall**
The centrepiece of the week was President Prabowo Subianto's visit to the United States, where eleven memoranda of understanding worth a combined US$38.4 billion were signed at an Indonesia-US Business Summit, witnessed by Prabowo himself. The most consequential of these was the extension of PT Freeport Indonesia's Special Mining Business Permit at the Grasberg deposit in Central Papua to 2061 -- a full two decades beyond its current horizon -- accompanied by a committed US$20 billion in additional investment. Crucially, the deal also hands the Indonesian state an additional 12 per cent equity stake at zero acquisition cost, raising total government ownership from 51 per cent to approximately 63 per cent by 2041, with a portion directed to Papua's regional government. Energy and Mineral Resources Minister Bahlil Lahadalia framed the extension not as a concession but as a strategic necessity: the underground reserves require up to a decade of exploration lead time ahead of projected peak production in 2035, and without the longer licence horizon, that work simply would not begin.
Alongside Freeport, Indonesia confirmed ExxonMobil's operational extension at the Cepu Block in East Java through 2055, backed by approximately US$10 billion in new investment, and state oil firm Pertamina formalised a memorandum of understanding with Halliburton for enhanced oil recovery technology at ageing domestic fields. The energy dimension of the US-Indonesia package was further deepened by Pertamina's plan to raise the share of LPG imports sourced from the United States from 57 per cent to roughly 70 per cent under a bilateral agreement potentially worth US$15 billion annually -- all to be procured through open tender, the company's chief executive Simon Aloysius Mantiri was careful to stress. At the same time, Minister Bahlil reiterated without ambiguity that Indonesia's downstream processing mandate for critical minerals remains intact: American firms are welcome to invest in smelters, but raw mineral exports will not reopen. The Prabowo administration appears to have threaded a difficult needle -- offering the United States significant commercial access while preserving the structural pillars of its resource nationalism agenda.
**Domestic Growth and Macro Signals**
The optimism from Washington found an echo at home. Finance Minister Purbaya Yudhi Sadewa doubled down on his domestic-demand thesis, arguing that with 90 per cent of Indonesia's economy driven by internal factors, a combination of government spending and private investment firing in tandem could deliver at least 6 per cent growth regardless of global headwinds. His confidence was bolstered by Indonesia's Q4 2025 GDP print of 5.39 per cent -- above IMF and JP Morgan forecasts -- and by think-tank Core Indonesia's projection of 5.5 per cent growth in Q1 2026, underpinned by Rp809 trillion in government expenditure that includes civil servant Eid bonuses and the Free Nutritious Meal programme now serving over 60 million beneficiaries. Bank Indonesia Governor Perry Warjiyo echoed this positive tone, citing fiscal-monetary synergy and holiday consumption as near-term drivers.
That optimism, however, must be weighed against more structural concerns. A World Bank report noted that 70 per cent of investment flowing into Indonesian manufacturing over the past five years has been directed at low value-added industries, even as the sector posted impressive 5.3 per cent growth in 2025. The declining ratio of job creation to investment and manufacturing's shrinking share of GDP point to a structural transformation that remains urgently unfinished. From Washington itself came an uncomfortable data point: US GDP growth slowed to a mere 1.4 per cent in Q4 2025, far below consensus, weighed down by a federal government shutdown and DOGE-related layoffs. That American weakness is not merely a curiosity -- it has direct implications for Indonesia's export outlook at a moment when the Prabowo government is deepening bilateral trade ties.
**Jakarta Under Water**
Whilst diplomats concluded billion-dollar deals in Washington, Jakarta endured one of its worst flooding events in recent memory. Sustained heavy rainfall from upstream in Tangerang and South Tangerang pushed multiple rivers -- the Ciliwung, Angke, Krukut, and Pesanggrahan -- over their banks on 20 February, inundating at peak count 168 neighbourhood units and seven roads across the capital. Floodwaters reached 1.5 metres in Kampung Melayu in East Jakarta. Governor Pramono Anung was publicly visible throughout the crisis, claiming that most flood points receded within two hours -- a claim somewhat at odds with disaster agency data showing 127 units still submerged by evening -- and defending the weather modification operations his administration has been conducting since late January. BPBD data indicates cloud seeding has reduced rainfall by 23.85 per cent since its deployment, though the scale of Friday's inundation tested that claim.
The flooding underscored the pressure on Pramono as he simultaneously advances a slate of ambitious urban projects. The governor this week launched the Rp134 billion revitalisation of Semanggi Park, funded entirely through a private naming-rights arrangement rather than the regional budget, with completion targeted for Jakarta's 500th anniversary in June 2027. He also confirmed plans to build two new hospitals -- including an international-standard facility on the long-disputed Sumber Waras land, resolving a 12-year impasse -- and announced a Rp100 billion programme to transform the Kuningan district to rival the Sudirman-Thamrin corridor before the city's 499th anniversary in June. These are the makings of an ambitious urban legacy; the flooding is a reminder of the more elemental challenges that underlie it.
**Reconstruction, Recovery, and Rural Infrastructure**
In Sumatra, the scale of last November's hydrometeorological disasters continued to assert itself. Bappenas put a formal price tag on the rehabilitation and reconstruction effort across Aceh, North Sumatra, and West Sumatra: Rp56.3 trillion across 2,108 activities over three years. Meanwhile, residents of Sibio-Bio village in Central Tapanuli remain cut off nearly three months after flash floods destroyed the bridges connecting them to the outside world, a quiet indictment of the pace of recovery. Governor Bobby Nasution confirmed that Rp60 million per household has been allocated for permanent housing in the most badly affected areas, and sovereign wealth fund Danantara -- through COO Dony Oskaria -- broke ground on 85 permanent housing units in Tanah Datar, whilst backing Semen Padang's interlocking Sepablock brick as the standard material for disaster reconstruction. The scale of what remains to be done, however, is daunting.
**Lebaran Logistics and the Village Cooperative Debate**
With Ramadan having just begun, attention turned to the logistics of the season's defining event. Transport Minister Dudy Purwagandhi forecast that some 144 million people will travel for Lebaran 2026 -- a figure he warned could be exceeded, as last year's actual movement of 154.6 million outstripped projections. The government has marshalled an extraordinary array of assets: 829 ships, more than 31,000 buses, 392 aircraft, 3,821 rail units, and ten additional functional toll road sections spanning nearly 291 kilometres. State ferry operator ASDP has deployed 75 vessels on the Merak-Bakauheni crossing alone, projecting 5.8 million passengers nationally.
Less settled is the trajectory of one of the government's signature rural development initiatives. The procurement of 105,000 commercial vehicles from Indian manufacturers Tata Motors and Mahindra for the Koperasi Desa Merah Putih (Merah Putih Village Cooperative) programme drew sustained parliamentary scrutiny this week, with legislators questioning both the rationale for importing vehicles when Indonesia produces up to one million pick-up units per year and the practicality of deploying Indian-brand vehicles to remote areas without established after-sales networks. The Rp24.66 trillion contract -- awarded to PT Agrinas Pangan Nusantara -- also sits uncomfortably against the news that Central Java's village funds have been 60 per cent ring-fenced for the cooperative programme under Finance Ministry regulation, cutting per-village discretionary funding from roughly Rp1 billion to Rp300-400 million. Whether these cooperatives prove transformative -- as Indef projects, with a potential 3 per cent GDP uplift from Danantara's downstream projects -- or become a fiscal strain, will be one of the defining economic questions of the year ahead.
**Looking Forward**
The week closed with Indonesia at a pivotal juncture. The Washington deals have injected momentum into the country's resource and energy sectors, but they also impose new obligations -- on procurement transparency, on downstream delivery, and on maintaining the coherence of a foreign policy that has historically kept Israel and the United States at arm's length while the Ormat geothermal controversy in Halmahera quietly festers. The Freeport and ExxonMobil agreements, if executed well, could anchor state revenues for a generation; if managed poorly, they risk reprising the grievances that have shadowed extractive deals in Papua for decades. Domestically, the onset of Ramadan brings both opportunity -- consumption, solidarity, Rp20 trillion in projected Jakarta spending alone -- and vulnerability, as chilli prices spike, flooding disrupts supply chains, and millions prepare to take to roads that, in many provinces, are still being patched ahead of the mudik rush. Indonesia enters this period with genuine economic momentum and genuine unresolved fragility, both in ample measure.
**The Washington Windfall**
The centrepiece of the week was President Prabowo Subianto's visit to the United States, where eleven memoranda of understanding worth a combined US$38.4 billion were signed at an Indonesia-US Business Summit, witnessed by Prabowo himself. The most consequential of these was the extension of PT Freeport Indonesia's Special Mining Business Permit at the Grasberg deposit in Central Papua to 2061 -- a full two decades beyond its current horizon -- accompanied by a committed US$20 billion in additional investment. Crucially, the deal also hands the Indonesian state an additional 12 per cent equity stake at zero acquisition cost, raising total government ownership from 51 per cent to approximately 63 per cent by 2041, with a portion directed to Papua's regional government. Energy and Mineral Resources Minister Bahlil Lahadalia framed the extension not as a concession but as a strategic necessity: the underground reserves require up to a decade of exploration lead time ahead of projected peak production in 2035, and without the longer licence horizon, that work simply would not begin.
Alongside Freeport, Indonesia confirmed ExxonMobil's operational extension at the Cepu Block in East Java through 2055, backed by approximately US$10 billion in new investment, and state oil firm Pertamina formalised a memorandum of understanding with Halliburton for enhanced oil recovery technology at ageing domestic fields. The energy dimension of the US-Indonesia package was further deepened by Pertamina's plan to raise the share of LPG imports sourced from the United States from 57 per cent to roughly 70 per cent under a bilateral agreement potentially worth US$15 billion annually -- all to be procured through open tender, the company's chief executive Simon Aloysius Mantiri was careful to stress. At the same time, Minister Bahlil reiterated without ambiguity that Indonesia's downstream processing mandate for critical minerals remains intact: American firms are welcome to invest in smelters, but raw mineral exports will not reopen. The Prabowo administration appears to have threaded a difficult needle -- offering the United States significant commercial access while preserving the structural pillars of its resource nationalism agenda.
**Domestic Growth and Macro Signals**
The optimism from Washington found an echo at home. Finance Minister Purbaya Yudhi Sadewa doubled down on his domestic-demand thesis, arguing that with 90 per cent of Indonesia's economy driven by internal factors, a combination of government spending and private investment firing in tandem could deliver at least 6 per cent growth regardless of global headwinds. His confidence was bolstered by Indonesia's Q4 2025 GDP print of 5.39 per cent -- above IMF and JP Morgan forecasts -- and by think-tank Core Indonesia's projection of 5.5 per cent growth in Q1 2026, underpinned by Rp809 trillion in government expenditure that includes civil servant Eid bonuses and the Free Nutritious Meal programme now serving over 60 million beneficiaries. Bank Indonesia Governor Perry Warjiyo echoed this positive tone, citing fiscal-monetary synergy and holiday consumption as near-term drivers.
That optimism, however, must be weighed against more structural concerns. A World Bank report noted that 70 per cent of investment flowing into Indonesian manufacturing over the past five years has been directed at low value-added industries, even as the sector posted impressive 5.3 per cent growth in 2025. The declining ratio of job creation to investment and manufacturing's shrinking share of GDP point to a structural transformation that remains urgently unfinished. From Washington itself came an uncomfortable data point: US GDP growth slowed to a mere 1.4 per cent in Q4 2025, far below consensus, weighed down by a federal government shutdown and DOGE-related layoffs. That American weakness is not merely a curiosity -- it has direct implications for Indonesia's export outlook at a moment when the Prabowo government is deepening bilateral trade ties.
**Jakarta Under Water**
Whilst diplomats concluded billion-dollar deals in Washington, Jakarta endured one of its worst flooding events in recent memory. Sustained heavy rainfall from upstream in Tangerang and South Tangerang pushed multiple rivers -- the Ciliwung, Angke, Krukut, and Pesanggrahan -- over their banks on 20 February, inundating at peak count 168 neighbourhood units and seven roads across the capital. Floodwaters reached 1.5 metres in Kampung Melayu in East Jakarta. Governor Pramono Anung was publicly visible throughout the crisis, claiming that most flood points receded within two hours -- a claim somewhat at odds with disaster agency data showing 127 units still submerged by evening -- and defending the weather modification operations his administration has been conducting since late January. BPBD data indicates cloud seeding has reduced rainfall by 23.85 per cent since its deployment, though the scale of Friday's inundation tested that claim.
The flooding underscored the pressure on Pramono as he simultaneously advances a slate of ambitious urban projects. The governor this week launched the Rp134 billion revitalisation of Semanggi Park, funded entirely through a private naming-rights arrangement rather than the regional budget, with completion targeted for Jakarta's 500th anniversary in June 2027. He also confirmed plans to build two new hospitals -- including an international-standard facility on the long-disputed Sumber Waras land, resolving a 12-year impasse -- and announced a Rp100 billion programme to transform the Kuningan district to rival the Sudirman-Thamrin corridor before the city's 499th anniversary in June. These are the makings of an ambitious urban legacy; the flooding is a reminder of the more elemental challenges that underlie it.
**Reconstruction, Recovery, and Rural Infrastructure**
In Sumatra, the scale of last November's hydrometeorological disasters continued to assert itself. Bappenas put a formal price tag on the rehabilitation and reconstruction effort across Aceh, North Sumatra, and West Sumatra: Rp56.3 trillion across 2,108 activities over three years. Meanwhile, residents of Sibio-Bio village in Central Tapanuli remain cut off nearly three months after flash floods destroyed the bridges connecting them to the outside world, a quiet indictment of the pace of recovery. Governor Bobby Nasution confirmed that Rp60 million per household has been allocated for permanent housing in the most badly affected areas, and sovereign wealth fund Danantara -- through COO Dony Oskaria -- broke ground on 85 permanent housing units in Tanah Datar, whilst backing Semen Padang's interlocking Sepablock brick as the standard material for disaster reconstruction. The scale of what remains to be done, however, is daunting.
**Lebaran Logistics and the Village Cooperative Debate**
With Ramadan having just begun, attention turned to the logistics of the season's defining event. Transport Minister Dudy Purwagandhi forecast that some 144 million people will travel for Lebaran 2026 -- a figure he warned could be exceeded, as last year's actual movement of 154.6 million outstripped projections. The government has marshalled an extraordinary array of assets: 829 ships, more than 31,000 buses, 392 aircraft, 3,821 rail units, and ten additional functional toll road sections spanning nearly 291 kilometres. State ferry operator ASDP has deployed 75 vessels on the Merak-Bakauheni crossing alone, projecting 5.8 million passengers nationally.
Less settled is the trajectory of one of the government's signature rural development initiatives. The procurement of 105,000 commercial vehicles from Indian manufacturers Tata Motors and Mahindra for the Koperasi Desa Merah Putih (Merah Putih Village Cooperative) programme drew sustained parliamentary scrutiny this week, with legislators questioning both the rationale for importing vehicles when Indonesia produces up to one million pick-up units per year and the practicality of deploying Indian-brand vehicles to remote areas without established after-sales networks. The Rp24.66 trillion contract -- awarded to PT Agrinas Pangan Nusantara -- also sits uncomfortably against the news that Central Java's village funds have been 60 per cent ring-fenced for the cooperative programme under Finance Ministry regulation, cutting per-village discretionary funding from roughly Rp1 billion to Rp300-400 million. Whether these cooperatives prove transformative -- as Indef projects, with a potential 3 per cent GDP uplift from Danantara's downstream projects -- or become a fiscal strain, will be one of the defining economic questions of the year ahead.
**Looking Forward**
The week closed with Indonesia at a pivotal juncture. The Washington deals have injected momentum into the country's resource and energy sectors, but they also impose new obligations -- on procurement transparency, on downstream delivery, and on maintaining the coherence of a foreign policy that has historically kept Israel and the United States at arm's length while the Ormat geothermal controversy in Halmahera quietly festers. The Freeport and ExxonMobil agreements, if executed well, could anchor state revenues for a generation; if managed poorly, they risk reprising the grievances that have shadowed extractive deals in Papua for decades. Domestically, the onset of Ramadan brings both opportunity -- consumption, solidarity, Rp20 trillion in projected Jakarta spending alone -- and vulnerability, as chilli prices spike, flooding disrupts supply chains, and millions prepare to take to roads that, in many provinces, are still being patched ahead of the mudik rush. Indonesia enters this period with genuine economic momentum and genuine unresolved fragility, both in ample measure.