HSBC Economist Sees Indonesia Growth Firming in 2026

JAKARTA, Investortrust.id — HSBC Global Research said Indonesia economy ends 2025 on a stronger footing and is poised carry the momentum to grow by 5.2 percent in 2026 as domestic consumption improves and policies turn more accommodative. The assessment was delivered by Pranjul Bhandari, Chief Indonesia and India Economist, during an online media briefing on Monday, Jan 12, 2026 in Jakarta, with growth expected to benefit from easing interest rates and social spending.

She said the economy recovered in the second half of 2025 after being constrained earlier by tight fiscal and monetary settings following the pandemic. The improving trajectory was seen as a base for sustained expansion next year.

Policy shifts were cited as a key driver of the rebound, with Bank Indonesia having cut policy rates by 150 basis points and the government rolling out social protection programs. These measures were said to have translated into stronger domestic demand.

Manufacturing indicators supported the view, as Indonesia purchasing managers index remained in expansion territory for five consecutive months toward the end of 2025. The strength was attributed mainly to rising domestic demand rather than external factors.

Bhandari also noted improving credit distribution, particularly for small business investment, alongside rising consumer confidence. However, she cautioned that part of consumption growth was still being funded by households drawing down savings.

She said more durable growth would require higher wages and stronger job creation to support spending, rather than reliance on depleted savings. Structural weaknesses therefore remained a medium term risk.

Looking to 2026, HSBC expected export growth to moderate as global demand normalized and export front loading faded. The slowdown was projected to be offset by firmer domestic demand.

Based on that balance, HSBC forecast Indonesia gross domestic product growth at around 5.2 percent in 2026. Stronger growth was also expected to lift tax revenues and give the government room to maintain spending without widening the fiscal deficit.

On monetary policy, Bank Indonesia was seen retaining scope for further easing, although moves would be cautious amid exchange rate considerations. HSBC expected rate cuts in 2026 to be opportunistic, potentially totaling three additional reductions if external conditions allowed.

Beyond near term dynamics, Bhandari emphasized the importance of reforms in manufacturing and foreign direct investment to secure medium term growth. She said Indonesia was well positioned to attract investment as global supply chains became more rigid and manufacturers sought new production bases.