Indonesia posts fastest economic growth in more than three years in Q1 of 2026
The growth rate was supported by a 21.8 per cent surge in government spending that included holiday bonuses for civil servants and spending for President Prabowo Subianto's free-meal programme in schools.
Vehicles drive on a highway as dark clouds are seen over the skyline during the rainy season in Jakarta, Indonesia, March 2, 2024. (Photo: Reuters/Willy Kurniawan)
JAKARTA: Indonesia's economy grew at its fastest annual pace in more than three years at the start of 2026, boosted by a surge in government spending and holiday celebrations, official data showed on Tuesday (May 5).
GDP grew 5.61 per cent in the January-March quarter from a year earlier, Statistics Indonesia said, stronger than the 5.30 per cent growth expected by analysts in a Reuters poll and the 5.39 per cent posted in the fourth quarter of 2025.
It was the fastest growth rate since the third quarter of 2022, supported by a 21.8 per cent surge in government spending that included holiday bonuses for civil servants and spending for President Prabowo Subianto's free-meal programme in schools.
"The first quarter likely marked the peak in the growth pace, with the momentum set to moderate in the subsequent quarters as real activity could be dampened by high energy prices and pressure to consolidate fiscal finances," DBS Bank analyst Radhika Rao said.
Growth in household spending, which makes up more than half of GDP, rose by an annual 5.52 per cent in the quarter, helped by the Muslim holy month of Ramadan. Spending, including on travel, normally rises during the festivities, which started in mid-February this year.
Investment expanded by 5.96 per cent, slightly slower than the 6.12 per cent growth in the previous quarter.
Prabowo came into office in late 2024 pledging to lift growth, which had hovered around 5 per cent since the pandemic, to 8 per cent during his term.
However, he faces challenges including budget pressures and from the war in the Middle East, which has led to higher energy prices and a weaker rupiah.
The government is targeting 5.4 per cent GDP growth for 2026, while Bank Indonesia forecast growth of 4.9 per cent to 5.7 per cent for the year.
The International Monetary Fund last month cut its global growth outlook for 2026 due to war-driven energy price spikes. It also shaved 0.1 percentage points off its outlook for Indonesia, cutting its forecast to 5 per cent.
