World Bank Projects Indonesia's Economy to Grow Below 5 Percent

The Indonesian government faces a policy dilemma with no truly comfortable options. Indonesia’s economy is projected to grow by 4.7-4.8 percent according to the World Bank, still below the government’s target of 5 percent economic growth. This figure is based on the release of the East Asia and Pacific Economic Update April 2026 report on Wednesday (8/4). Although below the target, this number is higher than the projected growth for the East Asia and Pacific (EAP) region, which stands at only 4.2 percent. The East Asia and Pacific countries include Indonesia, Cambodia, China, Laos, Malaysia, Mongolia, Myanmar, Papua New Guinea, the Philippines, Thailand, Timor-Leste, Vietnam, and Pacific Island Nations. “Indonesia is relatively resilient because its dependence on oil imports, for example, is lower than other countries,” said Aaditya Mattoo, the World Bank’s Chief Economist for East Asia and the Pacific. The report notes that Indonesia’s oil and gas imports in 2024 were around 1 percent of gross domestic product (GDP). In comparison, Thailand’s reached 7 percent, the Philippines 3 percent, and Vietnam 2 percent. Rising global oil prices are said to burden fiscal resources due to government subsidies and energy compensation. Additionally, inflation is assessed to potentially rise with increasing oil prices, which would elevate food costs and price increases impacting the value chain. Mattoo added that rising global risk sentiment could also pressure investment and consumption. The World Bank also states that Indonesia could recover if it achieves 5.2 percent economic growth in 2027. Besides Indonesia, the World Bank projects 2026 economic growth in Southeast Asia as follows: Malaysia at 4.4 percent, the Philippines at 3.7 percent, Thailand at 1.3 percent, and Vietnam at 6.3 percent. For prospects in the East Asia and Pacific region, Mattoo continued, they are influenced by three external factors: conflicts in the Middle East, trade restrictions in the United States including global policy uncertainty, and positive developments in the form of artificial intelligence (AI) technology.