When Economic Growth Figures Are Questioned
The Central Statistics Agency (BPS) released Indonesia’s annual economic growth for the first quarter of 2026 at 5.61%. This figure signals optimism for the national economy. Amid a global economic slowdown, geopolitical pressures, financial market uncertainties, and weak international trade, this achievement serves as evidence that Indonesia’s economy remains sufficiently resilient in facing external shocks.
However, in empirical economics, growth figures never stand alone. Economic growth is not merely about “what percentage”, but also about how that figure is formed, which sectors support it, aspects of sustainability, and consistency with other economic indicators.
Historically, Indonesia’s economic growth patterns are relatively predictable. The first quarter is usually a period of moderate growth as economic activity picks up again after the end of the year. Conversely, growth generally strengthens in the third quarter and especially the fourth quarter when government spending is fully disbursed, infrastructure projects are accelerated, and household consumption increases towards year-end.
Therefore, the 5.61% growth in the first quarter of 2026 appears unusual. Empirically, there is a kind of “overshooting growth” at the beginning of the year. Growth appears to exceed its normal historical pattern. The most rational explanation is a combination of several temporary factors working together.
The acceleration of government spending from the start of the year provided a significant aggregate demand stimulus. The momentum of Ramadan, Eid al-Fitr, and long holidays boosted household consumption, public mobility, transportation, hotels, restaurants, and retail trade. THR payments in March 2026 strengthened short-term purchasing power. Subsidies and social spending were also disbursed more quickly than in the previous year.
At the same time, several manufacturing sectors experienced increased production, particularly oil and gas processing and food and beverages, which are traditionally highly sensitive to domestic consumption momentum.
Several independent institutions such as LPEM, CELIOS, and INDEF have openly questioned the validity of the calculations and the consistency of the growth sources. Interestingly, they do not use alternative data to criticise BPS. The criticism is instead built using BPS’s own official data.
LPEM estimates that real growth is likely closer to the 4.89% range and considers the 5.61% figure potentially overestimated. CELIOS argues that headline GDP does not fully reflect the economic conditions felt by households due to the gap between macro growth and economic pressures experienced by households. Meanwhile, INDEF calls this phenomenon “infusion growth” – the economy grows due to government fiscal injections, not because the economic engine is moving organically.
The argument that has received the most attention is the contradiction between the electricity and manufacturing sectors. According to BPS data, the electricity, gas, and water sector experienced a contraction of −0.99%, while the manufacturing sector grew by 5.04%.
Electricity and energy are the main supporters of manufacturing production. In general, when industrial energy consumption weakens, manufacturing output also tends to slow. This is where suspicions arise that the manufacturing growth, which contributes 19% to GDP, is overestimated.
However, the modern economy no longer operates linearly like the old industrial model.
Electricity intensity relative to output continues to decline due to technological efficiency, production digitalisation, industrial automation, use of captive power, and industrial structure transformation. Many countries experience manufacturing output growth even though their energy consumption is stagnant or declining.
Moreover, at the beginning of 2025 there was an electricity tariff discount, whereas in 2026 that policy no longer applies. This is also a factor that caused the GDP growth in the Electricity sector to decline.
Temporary Factors
Empirically, Ramadan and Eid al-Fitr almost always increase household consumption in the short term. Long holidays increase public mobility and lift the services sector. Accelerated government spending from the start of the year provides additional fiscal stimulus. The allocation of social subsidies and the MBG (Free Nutritious Food) programme, which is much larger than the previous year, also strengthens domestic demand.
Therefore, first-quarter growth in 2026 indeed has a more demand-driven character than productivity-driven. The acceleration of state spending, especially MBG and social spending, could cause economic growth in the second quarter and beyond to moderate.
However, labelling the entire growth as “illusory” or “artificial” is also too simplistic.
The MBG programme, for example, does not only create short-term consumption. In the medium term, this programme has the potential to create a multiplier effect through strengthening food SMEs, local supply chains, absorption of informal labour, increased female workforce participation, and improvement in human resource quality.
The economy does not only move through large investments and exports, but also through strengthening domestic demand and local economic circulation.
Another issue that is most interesting in this debate is the surge in inventories in the GDP components. Data shows that inventory changes increased very sharply from around Rp4 trillion to more than Rp100 trillion in just one year.
In international national accounts practice, inventories often serve as a statistical adjustment space to balance the production and expenditure approaches. However, since the 2010 revision of the national accounts system, Indonesia’s inventories are no longer treated merely as a residual balancing item. Inventories are truly calculated as goods produced but not yet sold, whether raw materials, work-in-progress, or finished goods.
If those inventories are absorbed by the market in the following quarter, they can actually become a source of continued growth. But if not absorbed, ma