Indonesia: Headline GDP strength, mixed momentum – Societe Generale

Societe Generale economist Kunal Kundu notes Indonesia’s 2Q26 Gross Domestic Product (GDP) grew 5.3% year-on-year, beating the bank’s 5.1% forecast, but warns the composition is less reassuring. Public spending was the main support, while non-government GDP, private consumption and manufacturing stayed weak. Investment improved but boosted imports, and a large statistical discrepancy clouds assessment of Indonesia’s growth quality.

Public-led growth masks private softness

"Indonesia’s 2Q26 real GDP growth came in stronger than expected (5.3% yoy versus SGe 5.1%), but the composition of the data suggests that the headline number should be interpreted with caution."

"As a result, non-government GDP growth continued to languish, reinforcing the view that underlying economic momentum remains softer than the headline print suggests."

"This matters because growth led by public spending is qualitatively different from growth driven by private demand."

"This weakens the case for interpreting the GDP data as evidence of a strong consumer-led recovery."

"The key takeaway is that Indonesia’s economy continues to grow, but the quality, breadth, and reliability of that growth remain open to question."