Indonesian economists warn that sustaining economic momentum in 2026 hinges on supporting middle and lower-income households facing increasing living expenses, amid signs of slowing consumer demand and shrinking middle class.
Indonesia’s economic momentum in the second half of 2026 will hinge largely on whether households, especially those in the middle and lower income brackets, can keep spending, according to INDEF economist M Rizal Taufikurahman. He said in Jakarta on Monday that policy over the next two quarters should prioritise protecting purchasing power, with particular attention to families under pressure from rising living costs.
His warning comes as official data show consumer spending, which remains the main driver of the economy, is losing some pace. Indonesia’s statistics agency said household consumption grew 5.06% year on year in the second quarter of 2026, down from 5.52% in the first quarter. Rizal said that slowdown matters because consumption still made the biggest contribution to growth, helping push overall economic expansion to 5.29% year on year.
The economist argued that if consumer demand weakens while gross domestic product stays near 5%, more of the burden of growth shifts to investment and government spending. He said that would make it even more important to support households through tighter food-price control, better-targeted assistance, transport subsidies and measures to ease the cost of daily life. That view broadly aligns with the World Bank, which said in June that Indonesia’s economy remains resilient but still depends on strong domestic demand, and with the OECD, which sees softer consumption and investment as a drag on 2026 growth.
The concerns also reflect deeper structural strains. A report cited by Universitas Gadjah Mada showed Indonesia’s middle class shrank from 47.9 million people in 2024 to 46.7 million in 2025, underscoring how many households are living just below that threshold. At the same time, the World Bank projected 5.0% growth for 2026, the Asian Development Bank sees 5.2% and the OECD expects 4.7%, but all three point to the need for reforms and stronger domestic resilience if growth is to be sustained.
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