Indonesia’s Economy Defies Global Turmoil: Airlangga Says Strong Fundamentals, AI Push and Trade Deals Will Drive Next Growth Wave

JAKARTA, Investortrust.id — Indonesia's economy remains on solid footing despite mounting geopolitical tensions, supply chain disruptions and global trade fragmentation, Coordinating Minister for Economic Affairs Airlangga Hartarto said Friday, underscoring the government's confidence that Southeast Asia's largest economy can sustain growth above 5% while accelerating its transition into an AI-driven and green industrial powerhouse.

Speaking at the Kadin Indonesia Diplomatic Economic Breakfast in Jakarta, Airlangga said strong macroeconomic fundamentals, resilient banking conditions and ambitious structural reforms position Indonesia to weather global uncertainty better than many emerging markets.

Indonesia is doubling down on long-term economic transformation just as investors reassess emerging markets amid geopolitical risks and slowing global growth.

The government's strategy combines artificial intelligence, clean energy, downstream industrialization and expanded free trade agreements to attract investment while strengthening Indonesia's role in global supply chains.

"All indicators show Indonesia's economy remains safe and solid," Airlangga told diplomats, business leaders and international investors attending the event.

Indonesia's economy grew 5.61% in the first quarter of 2026, while the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) continue projecting annual growth of around 5%, according to Airlangga.

Inflation remains within the government's target range of 2.5% ±1%, while the country's cumulative trade balance continues to record a surplus.

Airlangga said the recent monthly trade deficit reflected higher imports of fuel following the surge in global energy prices rather than weakening export competitiveness.

The government is also introducing additional fiscal incentives to strengthen industrial competitiveness, including proposed import duty exemptions for plastic raw materials used by Indonesia's chemical industry and a six-month zero-tariff policy on imported liquefied petroleum gas (LPG) feedstock for petrochemical producers.

Indonesia will also continue flagship programs launched under President Prabowo Subianto, including subsidized small-business loans (KUR), affordable housing financing, the nationwide Free Nutritious Meals program and broader economic stimulus measures.

Airlangga added that Indonesia's banking sector remains healthy, with double-digit growth in third-party deposits and improving credit expansion compared with the previous quarter.

Economic Diplomacy Takes Center Stage

Airlangga argued that today's economic challenges extend far beyond trade disputes, encompassing energy security, technology, industrial policy, investment and artificial intelligence.

"Government-to-government relations must be followed by real business-to-business implementation," he said.

He said the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) plays a strategic role in connecting government policies with domestic businesses, regional governments and the international investment community to ensure high-level agreements generate tangible trade, investment and employment.

AI Emerges as Indonesia's Next Growth Engine

The government is building its long-term development strategy around three pillars: food security, energy security and digital transformation.

Airlangga described artificial intelligence as one of the world's next major economic drivers, comparing the technology to "a high-performance sports car" capable of delivering extraordinary benefits if managed properly but also creating significant risks without appropriate governance.

According to Airlangga, AI development depends on three key foundations: data, hyperscale data centers and semiconductor technology.

Indonesia is expanding international cooperation in these sectors, including partnerships with British semiconductor designer Arm to develop next-generation chip technologies.

The country is also participating actively in international AI governance discussions through forums including BRICS and the World AI Cooperation Organization.

Green Energy and Downstream Industries

Indonesia is accelerating its clean-energy transition through expanded biodiesel production, solar power, hydropower, natural gas and the future deployment of Small Modular Reactors (SMRs) for nuclear energy.

Airlangga said Indonesia recently launched its B50 biodiesel program, becoming the first country to implement diesel fuel containing a 50% biodiesel blend.

The initiative is expected to reduce fuel imports by approximately 44 million barrels annually while saving around US$10 billion in foreign exchange.

The government also plans to install 100 gigawatts of solar generation capacity over the next two years to support growing demand from AI infrastructure, hyperscale data centers, electric vehicles and green manufacturing.

Indonesia is simultaneously advancing plans for small-scale nuclear power generation through partnerships with Canada, Japan and the United States.

Trade Deals Drive Global Ambitions

Indonesia is expanding market access through several major international trade agreements.

Airlangga said negotiations on the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) are nearing completion and are expected to eliminate roughly 90% of tariffs between Indonesia and the European Union.

The government is also progressing toward membership in the OECD, having completed assessments covering 20 of 24 policy sectors with an average compliance rate of about 70%.

Indonesia is also pursuing accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) while strengthening bilateral economic ties with the United States, Canada, the Eurasian Economic Union, Japan, China, South Korea, India, Singapore and the United Kingdom.

Airlangga added that several of Indonesia's Special Economic Zones (SEZs) are approaching occupancy rates of 80% to 100%, prompting the government to prepare additional industrial zones across the country.

Kadin: It's Time to Sell Indonesia's Economic Story

Anindya Novyan Bakrie, Chairman of Kadin Indonesia, said economic diplomacy must be grounded in facts rather than perceptions.

"We see many voices and many perceptions around the world. But there are facts that need to be communicated," Anindya said during the forum.

"Indonesia is not yet perfect, but we are moving in the right direction, supported by strong economic fundamentals and leadership capable of delivering economic transformation."

He said Kadin will continue supporting Indonesia's OECD accession, implementation of international trade agreements and stronger engagement between the government and the global business community.

Closing the forum, Airlangga urged international partners to deepen cooperation with Indonesia.

"No country can overcome today's global challenges alone. We need more partners to build resilient supply chains, accelerate the green energy transition, develop technology and create shared prosperity. Indonesia is ready to be an open, stable and trusted partner," he said.