Indonesia Macro Update - GDP Growth 06 Feb 2026
KBVS MACRO UPDATE
Friday, 6 February 2026
Strong Headline Performance amid Structural Challenges
Indonesia’s economic growth in 4Q25 exceeded expectations, reaching 0.86% QoQ or 5.39% YoY. On a quarterly basis, the strongest expansion from the production side came from Public Administration, Defence, and Compulsory Social Security. Support from the expenditure side was particularly evident in 4Q25, led by a sharp acceleration in Government Consumption. Meanwhile, Household Consumption, which accounts for more than half of GDP, continued to support growth, expanding 1.84% QoQ and 5.11% YoY in 4Q25, or 4.98% YoY for full-year 2025.
Despite the stronger headline GDP growth, several indicators suggest that underlying demand remains moderate. Moreover, stronger economic growth has yet to be reflected in tax revenue performance. Against this backdrop, we view Moody’s decision on 5 February 2026 to revise Indonesia’s sovereign outlook from stable to negative, while maintaining the Baa2 rating, as understandable. For fixed-income markets, this development is likely to translate into a higher risk premium, particularly for future global bond issuances.
Looking ahead, government policy commitments to support household consumption, particularly through fiscal spending and social programs, are expected to remain key growth drivers. On the investment front, activity is expected to gradually improve, supported by resilient manufacturing indicators. Finally, the divergence between consumer expectations, manufacturing PMI, and business activity surveys suggests uneven economic gains across income groups.
Regards,
KBVS Research Team