• Indonesia’s economy expanded by 5.29 percent YoY in 2Q26, surpassing market expectations, as stronger investment and government spending offset moderation in private consumption.
• While economic fundamentals remain resilient, markets are placing greater emphasis on policy credibility. Key issues include the transition in Bank Indonesia’s leadership, state-owned enterprise (SOE) reforms under Danantara, and MSCI’s review of Indonesia’s equity market classification.
• KResearch projects that Indonesia’s economy will grow by 5.1 percent in 2026. However, growth is likely to moderate in the second half of the year amid elevated interest rates, volatile oil prices, and increasingly constrained policy space. Restoring investor confidence in the government’s economic policy framework will be crucial to easing financial market volatility and supporting economic growth going forward.
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