Joshua Pardede Sees 2026 Growth Hitting 5.4% on Investment Push

JAKARTA, Investortrust.id — Indonesia’s economic growth in 2026 can reach 5.4% in line with the state budget assumption if investment rises significantly alongside efficiency gains. Without stronger investment momentum, growth risks stalling around 5.2%, only slightly above the estimated 2025 outcome.

The outlook was delivered by Joshua Pardede, Vice Chairman of the Strategic Global Economic Studies Committee at Kadin Indonesia, during the Global and Domestic Economic Outlook 2026 seminar in Jakarta on Thursday, Jan 15, 2026. He said higher growth was essential to prevent Indonesia from falling into the middle income trap.

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Joshua said Indonesia’s GDP structure remained largely unchanged, with household consumption contributing about 55% and investment only around 28% to 30%. He argued that the private sector needed greater room to expand investment in partnership with the Danantara investment agency.

He added that medium term growth of around 8% would only be achievable if investment became the main growth engine. Without a higher investment share, job creation and productivity gains would remain limited.

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Investment realization through December 2025 was still seen as suboptimal, growing by less than 5%. Joshua said this highlighted the need for major breakthroughs in ease of doing business to attract both domestic and foreign investors.

Efficiency, he said, must improve alongside investment growth, pointing to the Incremental Capital Output Ratio that remained above 6.5. The ratio suggested that each additional percentage point of growth still required a relatively large amount of capital.

Joshua said Danantara could help accelerate strategic investment, but stressed that the private sector would remain the main driver of economic expansion. He noted that government spending alone would not be sufficient given increasingly tight fiscal space.

Indonesia’s economy grew 5.01% from the first to third quarters of 2025, while fourth quarter growth was estimated at around 5.45%. This placed full year 2025 growth close to 5.2%, forming the base for 2026 projections.

Despite controlled inflation, structural challenges persisted, including weak job creation, a shrinking middle class, and widening inequality. Joshua said growth quality needed to receive as much attention as headline growth figures.

He emphasized the importance of consistent pro growth and pro market policies to sustain business confidence. Policy continuity, he said, would be critical to encouraging long term investment decisions.

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Joshua also highlighted the need for stronger collaboration between private companies and state owned enterprises through public private partnerships and blended financing schemes. Such mechanisms were needed to support infrastructure and priority sector investment without overburdening the budget.

From a sectoral perspective, manufacturing remained the largest GDP contributor, but agriculture, fisheries, green economy activities, and creative industries needed stronger support. These sectors were seen as key to broader job creation and more even development.

On financing, Joshua said banking liquidity was ample, but credit demand remained weak. Many corporations continued to rely on retained earnings rather than bank loans, limiting credit growth to the real sector.

He concluded that regulatory certainty, streamlined licensing, stronger law enforcement, and lower logistics and business costs were essential to attract foreign direct investment. Structural transformation toward higher value added sectors, he said, was the only path to restoring sustainable growth of 7% to 8% over the longer term.