SMBC: Indonesia must rely on private sector to sustain economic growth

Global volatility reshapes Indonesia’s economic outlook Rising geopolitical tensions and growing global uncertainty are increasingly shaping Indonesia’s economic outlook, with policymakers, bankers, and economists warning of potential disruptions to supply chains, investment flows, and global market stability. Speaking at the SMBC Indonesia Economic Forum 2026 titled “Resilience in a Shifting Global Landscape” in Jakarta on Tuesday, May 19, 2026, President Director of Sumitomo Mitsui Banking Corporation (SMBC) Indonesia, Henoch Munandar said the global economy is entering a new era defined by geopolitical rivalry, energy transition pressures, technological competition, and shifting investment patterns. According to Henoch, these developments are creating a volatile and unpredictable international environment that is also affecting Indonesia’s economy. He described the current global environment as a “new normal” marked by instability, uncertainty, complexity, and ambiguity. Geopolitical tensions reshape economic strategy Henoch said geopolitical competition has expanded beyond traditional political disputes and now influences trade, energy security, industrial policy, and strategic supply chains. As a result, many countries are reassessing economic partnerships and investment strategies. Despite these challenges, he expressed optimism that Indonesia remains relatively well positioned due to its large domestic market and stable macroeconomic fundamentals. Henoch said Indonesia has an opportunity to turn global disruptions into economic advantages by improving competitiveness, attracting investment, and accelerating sustainable industrial development, including downstream processing initiatives. He also stressed that maintaining economic stability will be essential as geopolitical tensions continue to reshape the global economy. Closer collaboration between the government and private sector, he added, will be necessary to help Indonesia withstand external pressures while maintaining growth momentum. Indonesia seeks 6% growth through private sector expansion and fiscal discipline Senior economist Raden Pardede warned that Indonesia’s economy risks stagnating if it relies too heavily on government spending, arguing that the private sector should become the country’s primary growth engine. “Depending on the private sector, that is a bigger engine, so it is wrong to ignore the private sector as the larger engine,” Raden said during the SMBC Indonesia Economic Forum 2026 in Jakarta. Raden, who also serves on the Coordinating Ministry for Economic Affairs’ advisory team, said the government should act as a catalyst through deregulation, improvements in the ease of doing business, and productivity reforms, while allowing the private sector to play a greater role in driving growth. His view aligns with Finance Minister Purbaya Yudhi Sadewa, who said Indonesia could achieve 6% economic growth if the private sector is given greater room to expand and invest. Purbaya pointed to the administration of former President Susilo Bambang Yudhoyono, during which Indonesia recorded average growth of around 6% with strong private sector participation, compared with growth below 5% under former President Joko Widodo, when the economy relied more heavily on government-driven activity. Purbaya said the government’s role is to create conditions that allow businesses and investors to grow and innovate, rather than attempting to fully control economic activity. Meanwhile, Herman Saheruddin, Acting Director General of Financial Sector Stability and Development, said the government is maintaining fiscal discipline to support growth amid global economic uncertainty. He stressed the importance of keeping the state budget healthy and ensuring spending remains timely and impactful. “Our commitment at the Finance Ministry is to ensure that the state budget continues to function as a shock absorber so that Indonesians can continue their activities properly, particularly from the consumption side,” Herman said. Indonesia’s economy grew 5.61% in the first quarter of 2026, the highest among G20 economies, supported by strong household consumption, investment, and government spending. Herman said disciplined fiscal management is essential to maximize multiplier effects across sectors, including manufacturing, trade, agriculture, communications, and food and beverage. “Good government spending is spending that is disciplined, impactful, and timely,” he said.