UOB economists Enrico Tanuwidjaja and Vincentius Ming Shen highlight that Indonesia’s 1Q26 Gross Domestic Product (GDP) beat expectations at 5.61% year-on-year, driven by government spending, household consumption and investment. They stress that the current pace could reach the government’s 6% near-term target, but emphasize that fiscal discipline, effective investment strategies and stronger partnerships are crucial to sustain growth amid rising external risks.

Government-led expansion faces sustainability questions

"Fiscal expansion support 1Q26 growth, but unlikely to be sustained. Indonesia posted a stronger-than-expected GDP growth of 5.61% y/y in 1Q26, outperforming market expectations of 5.30%."

"Outlook remains positive, with seemingly enough pace to reach the near-term government’s target of 6%, but fiscal discipline remains the key factor here and going forward, effective investment strategies are critical to sustain momentum amid rising and uncertain external risks."

"While strong GDP growth signaled resilience, the reliance on fiscal expansion raises caution and unlikely to be sustainable."

"In short, an expansionary fiscal-led growth is unlikely to be sustainable given the constraint of fiscal deficit gap at 3% of GDP."

"Overall, though today’s 1Q26 report came in much stronger than expected, we remain cautious on its short-term trajectory and as such, we continue to keep our 2026 growth forecast unchanged at 5.2% for now, which is still stronger than 2025’s 5.1%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)