Indonesia’s economy expanded by 5.29% year on year in the second quarter of 2026, moderating from 5.61% in the previous quarter, while first-half growth reached 5.45%. The expansion was driven primarily by household consumption and fixed investment, which contributed 2.67 and 2.06 percentage points to GDP growth, respectively, while manufacturing, trade, and construction provided the largest sectoral contributions. Although the economy retained a broad domestic base, imports grew by 8.82%, more than twice the 4.13% increase in exports, indicating that net external demand constrained overall growth. The outlook nevertheless remains subject to downside risks, as government consumption growth may be difficult to sustain amid a fiscal deficit of 0.76% of GDP as of June 2026, while mining contracted and the expenditure accounts included a sizeable statistical discrepancy. Further deterioration in the external balance could increase rupiah volatility and prompt additional monetary tightening, raising borrowing costs and limiting the contribution of credit and investment to future economic growth.