• Indonesia’s 2Q26 GDP growth showed some moderation: GDP expanded 5.29% YoY, above the 5.1% market consensus and SSI’s 5.20% baseline forecast, but slower than 5.61% in 1Q26. This brought 1H26 growth to 5.45%, although tighter financial conditions and softer household fundamentals would likely limit momentum in the coming quarters.

 

• The domestic macro backdrop remains mixed despite improving headline indicators: July inflation eased to 2.88% YoY and manufacturing PMI recovered to 50.2 from 46.9. However, the second consecutive monthly trade deficit of USD450mn in June, together with signs of weakening household savings, suggests that domestic demand and external buffers remain relatively fragile.

 

• Investment activity provides some support, although implementation risks remain: New projects include a USD350mn EV-battery materials investment in Batang SEZ, IDR32tn of 1H26 SEZ investment, the USD20.9bn Masela project, hydropower development and a new Indonesia–Saudi Arabia investment agreement. However, the economic impact will depend heavily on project execution and how quickly investment translates into production and employment.

 

• Fiscal and policy actions become more aggressive, increasing the importance of fiscal discipline: The government injected IDR70tn of liquidity into state-owned banks, maintained Pertalite prices and introduced measures to lower financing and aviation costs. Meanwhile, IDR101.1tn of MBG spending in 1H26 and the government’s commitment to service IDR240tn of village-cooperative debt could increase medium-term fiscal pressure if revenue growth remains constrained.

 

• US Financial markets improved, but foreign investors' conviction remains limited: The JCI strengthened, the IDR mildly appreciated, but benchmark government-bond yields remained elevated and under pressures on the back of continued capital outflows, despite lower UST yields. We note that umulative foreign flows in the regular equity market remained a net sell, indicating that the domestic market recovery has yet to attract broad-based foreign risk-taking.