- Indonesia remains a global bright spot, with strong economic growth amid a challenging external environment, and with inflation expected to remain comfortably in the target range.
- A well-calibrated policy mix can support the economy; protecting Indonesia's hard-earned credibility and policy space remains crucial in a world of heightened external uncertainties.
- Bold structural reforms, including building on Indonesia's significant efforts to foster trade agreements, would boost the business climate, private sector-led growth and productivity, enabling a jobs-rich and sustainable path to realizing Indonesia's high-income potential.
Washington, DC: On January 14, 2026, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Indonesia. [1] The authorities have consented to the publication of the Staff Report prepared for this consultation.
The Indonesian economy has shown resilience amid adverse shocks. Growth is expected to remain steady at 5.0 percent in 2025 and 5.1 percent in 2026, despite a challenging external environment, reflecting support from fiscal and monetary policies. Headline inflation is well anchored and projected to converge towards the midpoint of the target range. The current account deficit would remain well contained in 2025-26, with comfortable reserves.
Risks are tilted to the downside. Escalating trade tensions, prolonged uncertainty, and global financial market volatility remain key external risks. On the domestic side, large policy shifts, if not implemented with sufficiently robust guardrails, could build up vulnerabilities. Upside risks include bolder structural reforms, including faster-than-anticipated push on the trade front, and positive spillovers from stronger growth among trading partners.
Executive Board Assessment [2]
Executive Directors welcomed Indonesia's economic resilience and track record of prudent policies despite external challenges. Noting downside risks from global uncertainty, Directors emphasized the importance of preserving longstanding policy credibility, protecting policy space, and accelerating structural reforms to ensure strong, sustainable and inclusive growth.
Directors welcomed the authorities' commitment to prudent fiscal policies, anchored by credible fiscal rules. They agreed that careful public spending execution and enhanced revenue mobilization would be important given the need to preserve buffers and achieve social and developmental objectives. Directors also encouraged the authorities to limit below‑the‑line and quasi‑fiscal activities to clarify the overall fiscal footprint and strengthen the effectiveness of the fiscal rules. While noting Danantara's potential to support Indonesia's development goals, Directors called for robust governance and accountability frameworks to prevent the buildup of contingent liabilities and quasi‑fiscal activities and contain risks.
Directors commended the successful anchoring of inflation to the target range and noted that the monetary policy easing through 2025 was warranted to support growth. Moving forward, they agreed that the policy stance should remain data dependent and well‑calibrated with fiscal policy. Directors considered that the exchange rate should continue to function as a shock absorber, with forex market interventions deployed under certain limited shocks and circumstances, while preserving reserve buffers. Directors supported ongoing efforts to deepen financial markets and strengthen the effectiveness of monetary policy transmission. They noted that, over the medium term, gradually lowering Bank Indonesia's presence in the government debt market could help enhance private sector participation and market liquidity and depth.
Directors welcomed the continuing resilience of the financial sector, and the authorities' efforts to enhance regulatory and supervisory frameworks, and financial sector development. They agreed with the accommodative macroprudential stance amid a negative credit gap, and supported a gradual shift towards a neutral stance as credit growth recovers.
Directors welcomed the authorities' ambitious reform agenda to accelerate growth and reach high‑income status by 2045, noting that achieving this in an inclusive manner will require durable and dynamic private sector‑led growth. They underscored that implementing ambitious structural reforms, including on deregulation, education and digital infrastructure, and fostering trade openness will be essential to this end. In particular, transitioning away from non‑tariff trade measures would be critical to further enhance global economic integration. They broadly noted that industrial policies should target market failures, while minimizing trade and investment distortions. Continuing to progress on the climate agenda would also be important.
Table 1. Indonesia: Selected Economic Indicators, 2023–28
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .
