Indonesia Eyes Up to 5.8% Growth in 2026 on Back of Eight Strategic Reforms
Main Takeaways
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JAKARTA, Investortrust.id — The Indonesian government has set a more ambitious economic growth target of between 5.2% and 5.8% for 2026, aiming to lift performance above the projected 2025 growth of 4.7%. Finance Minister Sri Mulyani Indrawati presented the strategy during a plenary session of the House of Representatives on Tuesday, outlining a comprehensive roadmap focused on achieving national sovereignty in food, energy, and the economy through eight key fiscal initiatives.
These initiatives include boosting agricultural production and food logistics through machinery subsidies, fertilizer support, and the expansion of government-managed food reserves. The energy strategy emphasizes a transition to cleaner sources, including solar, hydro, and geothermal power, along with increased use of palm oil-based biodiesel blends such as B40 and B50. The government will also roll out a nationwide free nutritious meals program for 82.9 million recipients through 30,000 food distribution centers.
Education receives one of the largest budget allocations, ranging between Rp727 trillion and Rp761 trillion (approximately $45.6–$47.8 billion), funding elite public schools, vocational training, early childhood education, and universities. The health sector is also a top priority, with up to Rp228 trillion ($14.3 billion) dedicated to expanding universal healthcare, reducing stunting, and ensuring free medical services.
At the grassroots level, the government plans to deepen its poverty alleviation efforts by supporting cooperatives and micro enterprises through the Red and White Village Cooperative (KDMP) framework. Defense modernization, cybersecurity investment, and support for the domestic arms industry will also be accelerated under the “total defense” doctrine. Finally, Indonesia aims to catalyze global trade and investment flows through Danantara, the sovereign wealth platform designed to optimize financing and investor confidence.
The macroeconomic assumptions behind the 2026 State Budget Draft (RAPBN) reflect optimism tempered by caution. The government forecasts inflation in the range of 1.5% to 3.5%, and a rupiah exchange rate between Rp16,500 and Rp16,900 per US dollar. It also targets daily oil production (lifting) at 600,000–605,000 barrels and gas production at 953,000–1,017,000 barrels of oil equivalent (BOE).
Beyond growth, the RAPBN 2026 targets social welfare improvements. Poverty is projected to fall to between 6.5% and 7.5%, while the open unemployment rate is expected to narrow to 4.44%–4.96%. The Gini coefficient, a measure of income inequality, is expected to stabilize between 0.377 and 0.380. The government also aims to raise the Human Capital Index (HCI) to 0.57, reflecting progress in education, health, and economic productivity.
Fiscal policy will remain expansive yet controlled. State revenue is projected at 11.71% to 12.22% of GDP, while state spending will account for 14.19% to 14.75%. The fiscal deficit is expected to stay within a range of 2.48% to 2.53%. To support this, tax reform remains central, including the implementation of the Coretax system, adherence to global tax agreements, and broader tax coverage through data integration. Financing strategies will include public-private partnerships, utilization of excess budget balances, and greater efficiency through Danantara.
The government acknowledges that 2026 will be marked by heightened global risks. New protectionist trade barriers, including high tariffs imposed by the United States on 145 countries, are reminiscent of the mercantilist era. Ongoing U.S.–China trade tensions and the weakening influence of the World Trade Organization have added to uncertainty. The International Monetary Fund (IMF) projects global growth at just 3.0% in 2026.
Even so, Indonesia remains confident in its domestic capacity to outperform, banking on policy discipline, structural reforms, and strategic investments. With global dynamics shifting, the 2026 State Budget is positioned not only as a tool for recovery, but as a foundation for long-term resilience and inclusive growth.