TEMPO.CO, Jakarta – Indonesia's economy is expected to grow below 5 percent in the second quarter of 2026, according to the Center of Reform on Economics (CORE) Indonesia, as global uncertainties and domestic policy challenges continue to weigh on the country's growth outlook.
Indonesia's statistics agency, BPS-Statistics Indonesia, is scheduled to release the official second-quarter GDP data on August 5.
In its latest Brief Report: CORE Midyear Economic Review 2026, titled "Betting on Economic Stability," the independent economic think tank said Indonesia faced mounting pressures from both external and domestic factors during the first half of the year, which are expected to dampen growth in the second quarter and throughout 2026.
"As a result, we project Indonesia's economic growth in the second quarter of 2026 to reach between 4.8 percent and 4.9 percent," CORE said in the report released on Saturday, August 1.
Global and Domestic Pressures Weigh on Growth
CORE said Indonesia's economy encountered more difficult conditions in the first half of 2026 than during the same period last year.
Although the impact of U.S. reciprocal tariff policies eased in the first quarter, the conflict involving Iran pushed up global energy prices and production costs, weakening economic prospects in the second quarter.
Domestically, the think tank said uncertainty surrounding government policymaking has also become a significant drag on the economy, particularly in fiscal management and the implementation of the central government's priority programs.
According to CORE, rapid policy shifts that have not been accompanied by clear communication have drawn attention from international credit rating agencies, including S&P Global Ratings, Fitch Ratings, and Moody's Ratings, which have all highlighted concerns over transparency in Indonesia's macroeconomic governance.
Reflecting these risks, international institutions including the International Monetary Fund (IMF), the World Bank, and the Organisation for Economic Co-operation and Development (OECD) have projected Indonesia's economic growth this year at between 4.7 percent and 5 percent.
Policy Uncertainty Hits Investor Confidence
CORE also pointed to Bank Indonesia's decision to raise its benchmark interest rate to 5.75 percent, saying tighter monetary policy is likely to put additional pressure on the real economy.
The institute argued that uncertainty over government economic policies has weakened investor confidence. It cited policy changes affecting strategic commodity exports, reductions in regional transfer funds, and adjustments to fiscal priorities as key concerns.
Several flagship government programs, including the Free Nutritious Meals (MBG) initiative and the Red and White Village Cooperative program, have also reshaped the government's fiscal management and contributed to policy uncertainty, CORE said.
For the full year, CORE projects Indonesia's economy to expand by 4.9 percent to 5.1 percent, below the government's 5.4 percent growth target for 2026.
The think tank said persistent vulnerabilities in both the global and domestic economy are likely to continue weighing on growth throughout the second half of the year, making it difficult for Indonesia to achieve its official target.
