Indonesia posts fastest economic growth in more than three years in Q1

Indonesia's economy grew at its fastest annual pace in more than three years at the start of 2026, boosted by a surge in government spending and holiday celebrations, official data showed on Tuesday. GDP grew 5.61% in the January-March quarter from a year earlier, Statistics Indonesia said, stronger than the 5.30% growth expected by analysts in a Reuters poll and the 5.39% posted in the fourth quarter of 2025. It was the fastest growth rate since the third quarter of 2022, supported by a 21.8% surge in government spending that included holiday bonuses for civil servants and spending for President Prabowo Subianto's free-meal programme in schools. "The first quarter likely marked the peak in the growth pace, with the momentum set to moderate in the subsequent quarters as real activity could be dampened by high energy prices and pressure to consolidate fiscal finances," DBS Bank analyst Radhika Rao said. Growth in household spending, which makes up more than half of GDP, rose by an annual 5.52% in the quarter, helped by the Muslim holy month of Ramadan. Spending, including on travel, normally rises during the festivities, which started in mid-February this year. Investment expanded by 5.96%, slightly slower than the 6.12% growth in the previous quarter. Prabowo came into office in late 2024 pledging to lift growth, which had hovered around 5% since the pandemic, to 8% during his term. However, he faces challenges including budget pressures and from the war in the Middle East, which has led to higher energy prices and a weaker rupiah. The government is targeting 5.4% GDP growth for 2026, while Bank Indonesia forecast growth of 4.9% to 5.7% for the year. The International Monetary Fund last month cut its global growth outlook for 2026 due to war-driven energy price spikes. It also shaved 0.1 percentage points off its outlook for Indonesia, cutting its forecast to 5%. ($1 = 17,425 rupiah)