Indonesia Economic Growth Slows to 5.10 Percent in Q2

Indonesia's economy experienced a slowdown in the second quarter of 2026, with year-on-year expansion forecast at 5.10 percent, a decrease from the 5.61 percent recorded in the first quarter. Economists from OCBC attribute the decline to weakening consumer demand following the festive season and a drop in net export support.

Rising energy import costs linked to the U.S.-Iran war pressured the economy, contributing to a 1.61 billion dollar trade deficit in May, the first such deficit for the country in six years. In response to these pressures, Bank Indonesia raised interest rates by 100 basis points since May to stabilize the rupiah.

The Government of Indonesia has attempted to buffer the downturn through government spending and energy subsidies totaling 381.3 trillion rupiah. Despite these measures, the current growth trajectory remains significantly below the 8 percent target set by President Prabowo Subianto for 2029.