Indonesia: Modest growth outlook – Standard Chartered

Standard Chartered’s Aldian Taloputra notes Indonesia’s Q2 GDP grew 5.3% year-on-year, slowing from 5.6% but beating consensus. Stronger-than-expected H1 data leads the bank to raise its 2026 GDP forecast to 5.3%. However, a weak recovery in formal-sector employment and cautious private-sector investment suggest growth will remain modest, with government programmes and household consumption offsetting subdued external demand.

Growth beats but headwinds persist

“Indonesia’s GDP growth slowed to 5.3% y/y in Q2 from 5.6% in Q1 but beat market expectations of 5.1%. While a slowdown was expected as one-off factors such as Eid spending and the harvest season faded, Q2 GDP still expanded faster than in 2025.”

“We raise our 2026 GDP growth forecast to 5.3% from 5.2% given stronger-than-expected H1 growth. We maintain our view that growth will remain modest, averaging 5.2% in H2, amid a weak recovery in formal-sector employment and still-cautious private-sector investment.”

“Despite ongoing job creation – the unemployment rate fell to 4.65% in May from 4.74% in November 2025 – formal-sector jobs, which typically offer better income security, fell to 40.7% of total employment from 42.3% over the same period.”

“We believe government priority programmes (including free meals, village cooperatives, social spending and infrastructure) and still-relatively healthy household consumption will support near-term growth.”

“This should help to offset subdued external demand and still-cautious private-sector activity.”

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