TEMPO.CO, Jakarta– S&P Global Ratings expects Indonesia's economy to grow by 5.1 percent in 2026, below the government's 5.4 percent target, citing external uncertainties and the impact of higher domestic interest rates.
The projection was released alongside S&P's decision to reaffirm Indonesia's sovereign credit rating at BBB, maintaining the country's investment-grade status with a stable outlook.
"We estimate Indonesia's real GDP growth to be 5.1 percent this year, considering that economic performance may slow in subsequent quarters due to ongoing external uncertainty and domestic interest rate hikes," the ratings agency said in a report published on Monday, July 13.
Growth Forecast Falls Short of Government Target
Looking beyond this year, S&P projects Indonesia's economy to expand by an average of 4.9 percent annually between 2026 and 2029.
Despite the slower growth outlook, the agency noted that Indonesia continues to record faster economic expansion than many other investment-grade countries, although its income levels remain comparatively lower.
Indonesia's GDP per capita is projected to rise to around US$5,200 this year from an estimated US$5,100 in 2025. Meanwhile, nominal GDP growth is expected to reach 8.3 percent.
Fiscal Discipline Remains Key
S&P expects the government to remain committed to maintaining fiscal discipline and keeping the budget deficit below the legal ceiling of 3 percent of GDP.
"We forecast that the government will continue adhering to fiscal rules to keep the deficit below 3 percent of GDP, despite rising energy costs," the agency said.
The ratings firm highlighted possible spending adjustments, including in the government's flagship Free Nutritious Meals program.
According to S&P, the program's initial budget allocation of more than Rp300 trillion could eventually be reduced by around one-third through changes in program design, improved efficiency, and tighter oversight.
The agency said Indonesia's prudent fiscal management remains one of the key factors supporting the country's stable sovereign rating outlook.
Rupiah Pressure and External Risks Persist
S&P also expects Indonesia's current account deficit to widen this year. However, stronger export earnings and a gradual normalization in global energy markets are likely to help mitigate the impact.
The agency further noted that the rupiah has come under significant pressure in 2026. Nevertheless, it expects Bank Indonesia to deploy a range of policy tools to stabilize the currency and prevent a substantial decline in foreign exchange reserves.
The stable outlook reflects S&P's expectation that Indonesia's economic resilience, fiscal prudence, and relatively strong external buffers will continue to support macroeconomic stability over the next two years.
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