World Bank Lowers Indonesia's Economic Growth Projection to 4.7 Percent in 2026, Still Above Regional Average
JAKARTA - The World Bank projects Indonesia’s economic growth at 4.7 percent in 2026, down from the previous estimate of 4.8 percent. This projection is included in the April 2026 edition of the East Asia and Pacific Economic Update, released on Wednesday (8/4/2026).
Although revised downward, the figure is still higher than the growth projection for the East Asia and Pacific (EAP) region, which stands at just 4.2 percent. This region encompasses several countries including China, Indonesia, Malaysia, Thailand, Vietnam, and Pacific Island nations.
The World Bank’s Chief Economist for East Asia and the Pacific, Aaditya Mattoo, stated that the region’s economic outlook is influenced by three main external factors: conflicts in the Middle East triggering rises in energy prices, trade restrictions in the United States along with global policy uncertainties, and rapid developments in artificial intelligence (AI) technology.
“We assess that Indonesia is relatively resilient because its dependence on oil imports, for example, is lower than other countries,” said Mattoo, as quoted from Antara on Thursday (9/4/2026).
Nevertheless, global shocks still have the potential to impact the domestic economy, particularly through rising oil prices that could increase fiscal burdens due to energy subsidies and compensation.
Inflationary pressures are also expected to rise in line with higher oil prices, surges in fertiliser costs driving up food expenses, and increases in semiconductor prices affecting global supply chains.
Mattoo added that rising global risk sentiment could suppress domestic investment and consumption.
However, the World Bank forecasts that Indonesia’s economy will strengthen again, with growth reaching 5.2 percent in 2027.
This recovery is projected to be driven by the operation of the state wealth fund Danantara, which channels more productive investments, increased private credit through liquidity injections, as well as government efforts to strengthen downstream industries, address obstacles, and attract foreign investment.
The report also highlights that Indonesia’s current economic growth of around 5 percent per year has exceeded estimates of potential growth, largely thanks to government support.
Looking ahead, structural reforms such as the removal of non-tariff barriers in the services sector, deregulation, and simplification of business licensing are seen as capable of boosting potential growth while creating more productive jobs.