IDEAS home Printed from https://ideas.repec.org/p/lpe/queout/202504.html

MACROECONOMIC ANALYSIS SERIES: Indonesia Economic Outlook 2026 - Suboptimal Quality of 5% Growth

Author

Listed:
  • Jahen F. Rezki

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Teuku Riefky

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Faradina Alifia Maizar

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Difa Fitriani

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Mervin Goklas Hamonangan

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Hardi Salim

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

  • Alif Ihsan A Fahta

    (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))

Abstract

Throughout 2025, Indonesia’s economy has experienced an eventful transition. The new government administration has brought about series of policy shifts. First, the new administration introduced numerous populist programs, such as free meal program and rural cooperatives, which generated massive fiscal implication and forced the government to implement aggressive budget cuts in various spending items including regional transfers. Second, mounting political pressures to accelerate growth has raised concerns over the erosion of central bank’s independence and fiscal authority role in influencing liquidity amidst the ongoing period of Rupiah depreciation. Third, the reported GDP growth for Q2-2025 presents several inconsistencies and anomalies when cross-checked against broader macroeconomic and micro-level indicators. Although headline figures suggest stronger growth compared with Q1-2025, several underlying indicators point to a weakening domestic demand and slower production activity. Fourth, the combination of rising interest payment, stagnant revenue receipts, and enormous expansion of fiscal spending due to populist program has brought serious risks on fiscal sustainability.

Suggested Citation

  • Jahen F. Rezki & Teuku Riefky & Faradina Alifia Maizar & Difa Fitriani & Mervin Goklas Hamonangan & Hardi Salim & Alif Ihsan A Fahta, 2025. "MACROECONOMIC ANALYSIS SERIES: Indonesia Economic Outlook 2026 - Suboptimal Quality of 5% Growth," LPEM FEBUI Quarterly Economic Outlook 202504, LPEM, Faculty of Economics and Business, University of Indonesia, revised Apr 2025.
    • Handle: RePEc:lpe:queout:202504
    as

    Download full text from publisher

    File URL: https://lpem.org/repec/lpe/queouts/IEO202504.pdf
    File Function: First version, 2025
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lpe:queout:202504. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bintoro Seto (email available below). General contact details of provider: https://edirc.repec.org/data/feuinid.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.