Standard Chartered’s Aldian Taloputra notes Indonesia’s GDP growth accelerated to 5.6% year-on-year in Q1 2026, driven by front-loaded fiscal stimulus, seasonal festival spending and limited pass-through from higher Oil prices. The bank expects growth to ease as these one-off supports fade, keeps its 2026 GDP forecast at 5.2%, and now projects a wider 2026 fiscal deficit of 2.9% of GDP.

Q1 strength seen as unsustainable

“Indonesia’s GDP growth accelerated to 5.6% y/y in Q1 (from 5.4% the previous quarter), the fastest pace since 2022.”

“Despite the strong Q1 headline print, growth remains government-driven; private-sector momentum remains modest given cautious business sentiment and subdued formal-sector expansion.”

“We maintain our 2026 GDP growth forecast of 5.2%. Fading seasonality, a weakening fiscal impulse and a slow formal-sector job recovery may weigh on growth momentum in the coming quarters, especially amid still-cautious business sentiment.”

“Government subsidies intended to bear most of the burden of rising energy costs are consumption-supportive, but may reduce fiscal space for more productive spending and weigh on fiscal credibility.”

“We now see a wider 2026 fiscal deficit of 2.9% of GDP versus our prior forecast of 2.7%. We expect the government to keep the deficit below the 3%-of-GDP cap by reallocating spending, optimising revenue collection, and using below-the-line financing.”

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