Jakarta, TopBusiness—Indonesia’s economic fundamentals remain solid. However, elevated global oil prices are increasing fiscal pressures through higher energy subsidies, while evolving market dynamics and financial market volatility underscore the importance of maintaining investor confidence. This will require conserving fiscal sustainability, preserving Bank Indonesia’s role in safeguarding macroeconomic and financial stability, strengthening governance, and ensuring credible, predictable, coordinated, and clearly communicated policies.
Group Head and Lead Economist AMRO, Ravi Balakrishnan, mention his analytic at press release who received by Majalah TopBusiness (August 30, 2026).
Recent Developments and Outlook
AMRO staff project Indonesia’s economy to grow 5.3 percent in 2026, supported by resilient domestic consumption and firm investment activities, backed by government spending on priority programs.
“Amid heightened global uncertainty and multiple challenges at home, prolonged high global energy prices and volatile capital flows are weighing on Indonesia’s outlook,” said Balakrishnan.
“The government’s policy initiatives address important development needs. Achieving their intended outcomes will require carefully calibrated policy design and effective implementation, supported by clear and consistent communication and close coordination across agencies. Preserving the central bank’s ability to focus on macroeconomic and financial stability will also be essential to maintaining policy credibility, something fundamental to supporting sustainable economic growth,” he added.
AMRO staff project annual average inflation to rise to 3.4 percent in 2026, remaining within the official inflation target range. Subsidized retail energy prices are expected to continue mitigating the pass-through from higher global oil prices. Nevertheless, inflationary pressures could intensify because of higher energy prices, the effects of a strong El Niño on the production of key agricultural commodities, and the lagged impact of rupiah depreciation.
“Under a more adverse scenario, these factors could temporarily push inflation above the target range in the coming months,” he mention.
Indonesia’s external position remains solid, notwithstanding the current account deficit being projected to temporarily widen given higher oil imports and income repatriation by foreign corporations. Portfolio investment is expected to record modest net inflows. This is supported by foreign inflows into Bank Indonesia Rupiah Securities (SRBI) and, to a lesser extent, the government bond market, despite net outflows from the equity market. While international reserves have moderated, they remain above conventional adequacy benchmarks.
Fiscal discipline has been maintained. Given rising costs of energy subsidies, the government has rationalized several budget items to keep the budget deficit within the statutory limit of 3 percent of GDP. In particular, priority programs such as the Free Nutritious Meal and the Red and White Village Cooperative Programs have been streamlined. Overall, in 2026, the fiscal deficit is projected to remain at 2.8 percent of GDP, as revenue gains from improved tax administration are expected to offset higher fiscal spending on energy subsidies and the implementation of priority programs.
Bank Indonesia’s policy actions have been responsive and well calibrated under extremely challenging conditions. Bank Indonesia raised the BI-Rate by a cumulative 100 basis points during May and June 2026, before staying on hold at 5.75 percent during the last two meetings. It has also strengthened monetary operations, foreign exchange market measures, and other policy measures to support capital inflows and reinforce rupiah stability. At the same time, the central bank has prudently recalibrated its macroprudential policy settings to support credit intermediation and sustain economic growth. This is supported by a resilient banking sector with strong capital and liquidity buffers, sound asset quality, and continued profitability.