The International Monetary Fund (IMF) has raised its projection for Indonesia’s economic growth in 2026 to 5.1 percent. The revision is outlined in the January 2026 edition of the World Economic Outlook Update and the Article IV Consultation report released in the same month.
Despite the upward revision, the figure remains below the Indonesian government’s official growth target for 2026.
Previously, the IMF had projected Indonesia’s economy to grow by 4.9 percent in both 2025 and 2026, as stated in the October 2025 edition of the World Economic Outlook. In its latest update, the IMF now forecasts economic growth of 5.0 percent in 2025, rising to 5.1 percent in both 2026 and 2027.
Between Optimism and Policy Risks
In its January 2026 Article IV Consultation, the IMF noted that Indonesia’s economy has demonstrated resilience amid various external shocks.
“Growth is expected to remain steady at 5.0 percent in 2025 and 5.1 percent in 2026, despite a challenging external environment, reflecting support from fiscal and monetary policies,” the IMF stated in its report.
The IMF also assessed that Indonesia’s headline inflation remains well contained and is projected to stay around the midpoint of the official target range. In addition, the current account deficit is expected to remain manageable in 2025–2026, supported by what the IMF considers adequate foreign exchange reserves.
Financial sector stability is also viewed as being maintained. However, the IMF cautioned that continued vigilance is needed regarding banking asset quality, particularly as various post-pandemic regulatory forbearance measures are gradually unwound.
Nevertheless, the IMF highlighted several risks that could weigh on economic performance. On the external front, escalating global trade tensions, policy uncertainty, and volatility in international financial markets remain key risk factors.
Domestically, the IMF warned that major policy shifts implemented without strong safeguards could increase economic vulnerabilities.
Gap With the Government’s Growth Targets
The IMF’s projection remains below the Indonesian government’s official target. The government has set an economic growth target of 5.4 percent for 2026.
Meanwhile, Finance Minister Purbaya Yudhi Sadewa has previously expressed optimism that Indonesia’s economy could expand by as much as 6 percent in 2026.
President Prabowo Subianto has also voiced confidence that Indonesia’s economic growth will exceed expectations. In his speech at the World Economic Forum (WEF) in Davos, Switzerland, on Thursday, January 22, 2026, Prabowo emphasized that Indonesia’s economic conditions remain stable and well managed.
“I am confident that our growth—our economic growth—will significantly surprise many around the world,” Prabowo said.
He added that Indonesia’s economy has consistently grown above 5 percent in recent years, with annual inflation kept under control at around 2 percent.
Strong Growth in a Slowing World
In the global context, the IMF also revised upward its projection for world economic growth in 2026 to 3.3 percent, from a previous estimate of 3.1 percent. The revision was driven by fiscal stimulus, more accommodative monetary policies, and a surge in technology investment, including artificial intelligence (AI). For 2027, the IMF maintained its global growth forecast at 3.2 percent.
Among emerging economies, Indonesia’s growth outlook remains relatively strong. In 2026 and 2027, Indonesia’s growth rate is projected to trail only the Philippines—forecast to grow by 5.6 percent in 2026 and 5.8 percent in 2027—and India, which is expected to expand by 6.4 percent.
By contrast, China is projected to experience a slowdown, with growth easing from 5.0 percent in 2025 to 4.5 percent in 2026 and 4.0 percent in 2027. Malaysia and Thailand are also expected to record lower growth rates than Indonesia.
Compared with the World Bank, the IMF’s projections are broadly aligned. In its January 2026 edition of Global Economic Prospects, the World Bank forecasts Indonesia’s economy to grow by 5.0 percent in 2026, rising to 5.2 percent in 2027. The World Bank attributes this growth to government fiscal stimulus and state-led investment.
Policy Discipline Under Pressure
The IMF emphasized the importance of maintaining consistent fiscal and monetary policies to safeguard macroeconomic stability. A gradual normalization of macroprudential policies is considered necessary to ensure that credit growth remains healthy without generating systemic risks.
In addition, deregulation and structural reforms are viewed as critical to attracting foreign direct investment beyond the commodity sector.
The IMF also highlighted the need to improve the quality of human capital, strengthen productive sectors, and expand digital transformation, including among micro, small, and medium-sized enterprises (MSMEs), to enhance their contribution to gross domestic product in a more productivity-driven manner.
Greater openness in international trade integration is expected to bolster the competitiveness of the national manufacturing industry.
With projected growth of 5.1 percent in 2026, the IMF places Indonesia among economies demonstrating stable performance amid global uncertainty. However, achieving growth above this level will continue to depend on the effectiveness of policy implementation and the government’s ability to strike a balance between economic stability and expansion.
