The Indonesian government has expressed optimism about achieving a national economic growth target of 8 percent. However, Lecturer at the Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada (FEB UGM), Akhmad Akbar Susamto, S.E., M.Phil., Ph.D., stated that the 8 percent growth target is still challenging to achieve in the near term. Although the national economy remains relatively resilient, Indonesia continues to face structural constraints that hold back faster growth.
“We all certainly aspire to high economic growth. However, realistically speaking, the 8 percent target remains far from Indonesia’s current structural economic conditions,” he said recently at the Economic and Business Journalism Academy held at FEB UGM: Indonesia Economic Outlook 2026.
Akbar explained that Indonesia has only recorded 8 percent economic growth four times in its history. In fact, over the past 30 years, national economic growth has never exceeded 7 percent.
“In the last 30 years, Indonesia has never again achieved growth of 7 percent or more,” he added.
Projections from international and national institutions such as the International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB), as well as domestic research institutions, indicate that economic growth in 2026 will likely remain around 5 percent. While Indonesia’s economy is considered resilient, it is still constrained and unable to accelerate significantly.
“Indonesia’s economy in 2026 is projected to grow at a normal rate of around 5 percent,” he noted.
Furthermore, Akbar stated that Indonesia’s economic growth continues to be driven primarily by household consumption and investment. Household consumption is expected to remain the most significant contributor to GDP growth from the expenditure side. Investment also plays a vital role in supporting growth, although it tends to fluctuate.
“A decline in realized foreign direct investment (FDI) has occurred across many sectors, including mining, chemicals, and transportation, which previously served as key pillars of investment growth,” he explained.
Meanwhile, the external trade sector is unlikely to become a growth engine in 2026. According to Akbar, Indonesia’s export value will remain under pressure due to reciprocal tariff policies imposed by the United States and weakening prices of several key commodities. On the other hand, imports are projected to increase, particularly from China, as a result of global market reallocation driven by trade tensions and partner countries’ efforts to offload excess manufacturing capacity.
So, what should be done to boost economic growth? In the short term, Akbar emphasized the need to ensure that every rupiah spent by economic actors generates greater output.
“Every rupiah of government spending must also generate greater output,” he added.
Akbar also highlighted the 2026 State Budget (APBN), which is projected to run a deficit of Rp689.1 trillion and is expansionary to stimulate economic activity, though not necessarily pro-growth. For example, government capital expenditure has fallen by up to 20 percent. In fact, capital spending not only directly stimulates economic growth but also generates more substantial multiplier effects through gross fixed capital formation (GFCF), thereby enhancing production capacity and supporting medium- to long-term growth. In contrast, although the Free Nutritious Meals (MBG) program contributes directly to GDP, its multiplier effect on economic growth is relatively limited, as its economic benefits materialize indirectly and over the long term.
‘In the short term, the programme needs to undergo a redesign so that its multiplier and economic spillover effects can strengthen,” said Akbar, who also serves as Director of Research in Macroeconomics and Fiscal-Monetary Policy at the Center of Reform on Economics (CORE) Indonesia.
In the longer term, efforts to enhance economic growth should include increasing government capital expenditure, accelerating the realization and certainty of investment projects, and encouraging the expansion of quality private investment and foreign direct investment. Additionally, public spending and investment should focus on sectors that reduce economic costs, particularly logistics, energy, and connectivity, by restructuring large-scale spending programs and integrating social and development programs with productivity agendas.
“More importantly than merely increasing investment or expanding government spending, we need to transform the behavior of economic actors through institutional reforms and healthier rules of the game,” he concluded.
Report: Shofi Hawa Anjani
Editor: Kurnia Ekaptiningrum
Sustainable Development Goals
