This Week in the Indonesian Economy (20-26 Feb 2026)

The week of 20 to 26 February 2026 proved one of the most consequential in Indonesia’s recent economic calendar, defined above all by the deepening of the Indonesia-United States trade partnership, a roiling national debate over village cooperatives and industrial policy, and the persistent challenge of managing a vast archipelago on the cusp of its annual Eid al-Fitr exodus.

A Washington Windfall – and Its Conditions

The headline development of the week was the cluster of agreements concluded during President Prabowo Subianto’s visit to Washington DC, where Indonesia and the United States formalised an Agreement on Reciprocal Trade (ART) accompanied by eleven memoranda of understanding worth a combined US$38.4 billion. The centrepiece was the extension of PT Freeport Indonesia’s Special Mining Business Permit to 2061, with Freeport-McMoRan committing approximately US$20 billion in additional investment over two decades. Under the terms, Indonesia’s stake in the Grasberg operation will rise from 51 per cent to 63 per cent by 2041 through a cost-free 12 per cent divestment, a portion of which will flow to Papua’s regional government. Separately, ExxonMobil secured an extension of its Cepu Block contract until 2055, locking in around US$10 billion in further investment.

The agreements also carried obligations. Pertamina confirmed plans to increase its share of LPG sourced from the United States from approximately 57 per cent to 70 per cent, and the government committed to purchasing American energy commodities, Boeing aircraft, and agricultural goods worth tens of billions of dollars in aggregate. Energy Minister Bahlil Lahadalia was at pains to reassure investors that mandatory downstream processing of critical minerals remains firmly in place – US firms may explore and invest in nickel and rare earths, but raw ore exports are not returning. A US$4.89 billion Joint Development Agreement for a semiconductor manufacturing hub in Galang, Batam, rounded out the week’s trade diplomacy, with analysts projecting some 5,000 skilled jobs upon full operation.

Critics were not silent. Economist Achmad Nur Hidayat warned that the negotiations had been rushed, potentially weakening Indonesia’s long-term bargaining position, while the Centre for Economic and Law Studies (CELIOS) cautioned that relaxation of local content requirements could discourage domestic manufacturing. The Financial Services Authority (OJK) pledged to examine carefully how the ART’s tariff provisions might affect the national banking sector, and parliamentarians questioned whether the Freeport extension appropriately reflected the full value of Papua’s mineral wealth. These concerns notwithstanding, the package represented a significant vote of confidence in the Prabowo administration’s economic management.

The Agrinas Affair and the Battle for Village Economies

If Washington produced the week’s highest-profile deals, the domestic political economy was consumed by a controversy of a different kind: the plan by PT Agrinas Pangan Nusantara to import 105,000 pickup trucks from India’s Mahindra and Tata Motors at a total cost of IDR 24.66 trillion, intended to supply the government’s Merah Putih Village Cooperative (Kopdes) programme. The Agrinas chief, Joao Angelo De Sousa Mota, defended the decision by arguing that Indonesia does not manufacture four-wheel-drive commercial pickups domestically, and that the imported models were significantly cheaper than available alternatives.

The backlash was swift and broad. Trade unions estimated that domestic production of equivalent vehicles could create at least 10,000 jobs. The Indonesian Chamber of Commerce (Kadin) demanded Indian manufacturers establish local factories as a condition of such large-scale procurement. Parliamentarians across multiple factions, including the Budget Committee chairman Said Abdullah and members of PDI-Perjuangan, called for the contract to be cancelled outright, warning that economic analysis by CELIOS projected a potential GDP reduction of IDR 39.29 trillion. The Cooperative Minister, Ferry Juliantono, distanced his portfolio from the decision, while President Prabowo reportedly requested a review. By week’s end, Agrinas confirmed it had already paid a 30 per cent deposit of IDR 7.39 trillion and that 1,000 units had arrived at Tanjung Priok, but the import programme appeared headed for at least a partial pause.

The broader debate over village cooperatives intensified simultaneously. The Villages Minister, Yandri Susanto, announced a halt to new permits for Alfamart and Indomaret outlets in rural areas to protect the nascent Kopdes network, prompting the Trade Minister, Budi Santoso, to seek clarification and reassure modern retailers that existing outlets would not be shuttered. The Association of Street Vendors (APKLI) revealed that the number of traditional small shops had fallen from 6.1 million in 2007 to just 3.9 million by 2025, and called for a review of Presidential Regulation No. 112 of 2007, which had facilitated the expansion of modern retail chains into rural territory. The Cooperative Minister responded by announcing a formal re-evaluation of that regulation.

Financial Markets, Investment, and the Rupiah

Indonesia’s capital markets had a volatile week. The Jakarta Composite Index (IHSG) opened Thursday positively before plunging as much as 2 per cent at points, ultimately closing down 1.05 per cent at 8,235.26, as US tariff concerns – specifically new levies on solar cells and panels from Indonesia, India, and Laos – rattled sentiment. The energy, logistics, and consumer discretionary sectors bore the heaviest selling pressure. Despite the equity turbulence, the Rupiah actually strengthened against the dollar, rising to around IDR 16,744 per US dollar, supported by strong demand for Indonesian government bonds: a recent global euro bond offering was oversubscribed by 3.4 times.

Bank Indonesia reported that overall bank lending grew 9.96 per cent year-on-year in January 2026, an improvement from 9.69 per cent in December. The troubling footnote, however, was that lending to MSMEs continued to contract, a structural concern that economists at Bank Mandiri argued could only be reversed if the trade, agriculture, and manufacturing sectors all strengthened in tandem. The Investment Coordinating Board (BKPM) announced that total investment realisation in 2025 reached a record US$120.7 billion, a 12.7 per cent year-on-year increase that created some 2.7 million jobs. Moody’s, meanwhile, predicted 5 per cent real economic growth for Indonesia this year, though it noted that policy predictability had weakened, contributing to equity and foreign exchange volatility – a concern that brought Danantara’s CEO, Rosan Roeslani, to New York for a direct engagement with the rating agency’s executives.

Energy Transition and Industrial Ambition

Danantara pressed ahead with several strategic initiatives beyond its US engagements. The sovereign investment body confirmed it would soon announce winners of the first phase of its Waste-to-Energy (WtE) project tenders, covering Denpasar, Bekasi, Bogor, and Yogyakarta, with an initial investment of US$150 to 170 million per location. Twenty-four international companies from China, Japan, and France were understood to be competing, with PT Daaz Bara Lestari and PT Maharaksa Biru Energi among the names circulating as potential frontrunners. The Finance Minister separately held a near-two-hour session with Inpex Masela Ltd and SKK Migas to unblock the long-stalled Abadi Field LNG project in Maluku, valued at nearly US$21 billion, demanding the project reach commercial production before 2029 and committing to designate Inpex as a special investor to clear regulatory obstacles.

The B40 biodiesel programme delivered solid results for 2025, with the Indonesian Biofuel Producers Association reporting that it saved approximately IDR 133.3 trillion in foreign exchange during the year and achieved a realisation rate of 95.67 per cent of the national allocation, with the 2026 quota rising marginally to 15.646 million kilolitres.

Ramadan, Eid Preparations, and Food Price Pressures

With Ramadan already under way and Eid al-Fitr approaching in late March, economic management of the holiday season dominated domestic policymaking. The National Food Task Force reported that intensive monitoring over the preceding three weeks – covering 28,270 inspections – had contributed to price declines across several staple commodities, and issued 350 warnings to businesses alongside referrals for criminal prosecution in four cases of food safety violations. Some 77 tonnes of illegal meat and formaldehyde-laced noodles were uncovered and seized. Pertamina activated its Ramadan and Eid task force from 3 March, pledging 24-hour monitoring of fuel distribution, while the government allocated IDR 11.92 trillion for food aid to 33.2 million vulnerable families.

Infrastructure readiness for the expected 143.9 million travellers received close attention. Central Java reported 94 per cent of provincial roads in good condition; West Java’s governor Dedi Mulyadi applied for an IDR 2 trillion regional loan to sustain strategic infrastructure projects after a nearly IDR 3 trillion fiscal shortfall; and the Palembang-Betung toll road, part of the Trans-Sumatra network, was being prepared for a limited operational opening during the homecoming period. The government also announced plans to extend the tenor of subsidised home loan repayments to 30 years, alongside exemptions from land acquisition tax, building permit fees, and VAT on new homes up to IDR 2 billion, in a bid to widen access to ownership for lower-income households.

Looking Ahead

The coming weeks will test several critical threads simultaneously. Danantara’s WtE tender announcement, expected in early March, will reveal how seriously foreign capital takes Indonesia’s green infrastructure ambitions. The fate of the Agrinas vehicle import – whether suspended, restructured, or cancelled – will signal how the government balances rural development urgency against industrial nationalism. And the Eid period itself, with its 144 million travellers, will function as a real-world stress test of everything from toll road readiness to food price stability. Finance Minister Purbaya Yudhi Sadewa has pledged to monitor first-quarter ministry spending closely in pursuit of 6 per cent GDP growth, and Bank Indonesia Governor Perry Warjiyo remains confident in the momentum. For Indonesia, the weeks ahead represent both a high-stakes political-economic juncture and the most immediate measure of whether the Prabowo administration’s ambitious growth machinery is gaining reliable traction.