Highlights

• Indonesia’s Q1 2026 GDP Growth Surprised on the Upside: Indonesia’s economy expanded by 5.61% YoY in Q1 2026, surpassing market expectations and remaining inline with SSI’s forecast of 5.54%. Growth was mainly supported by resilient household consumption during Ramadan and Eid festivities, accelerated government spending, and continued implementation of the Free Nutritious Meal (MBG) program. However, softer exports and moderating investment suggest underlying growth quality remains mixed amid rising global uncertainty.

 

• Inflation Continued to Ease, Providing Greater Policy Flexibility: Indonesia’s April inflation slowed sharply to 2.42% YoY, below both SSI’s forecast and market consensus. The moderation was largely driven by easing food and housing inflation, indicating improving supply-side conditions after Ramadan. The softer inflation environment provides Bank Indonesia with additional room for policy maneuvering, although imported inflation risks from higher oil prices and rupiah weakness remain elevated

 

• Manufacturing Activity Returned to Contraction Territory: Indonesia’s manufacturing PMI fell to 49.1 in April 2026, entering contraction territory for the first time in nine months. The decline reflected post-festive normalization, weaker global demand, and intensifying geopolitical disruptions affecting supply chains and production costs. The weaker PMI highlights growing vulnerabilities within Indonesia’s industrial sector amid prolonged external uncertainty.

 

• Bank Indonesia Intensified Efforts to Stabilize the Rupiah: The rupiah remained under pressure near IDR 17,300–17,400/USD amid rising geopolitical tensions and capital outflows from emerging markets. In response, Bank Indonesia strengthened its stabilization measures through tighter FX regulations, enhanced liquidity management, and broader macroprudential coordination. The government also prepared panda bond issuance and a Bond Stabilization Fund to strengthen market confidence and reduce dependence on the US dollar.

 

• Structural Transformation Agenda Continued to Accelerate: Indonesia continued advancing its medium-term transformation agenda through EV incentives, AI ecosystem expansion, renewable energy development, nuclear energy exploration, and major infrastructure projects. These initiatives reflect the government’s broader strategy to balance short-term macroeconomic stabilization with longer-term economic modernization and sustainability objectives.