The early-August release of Indonesia’s second-quarter GDP growth will be an important checkpoint for the economy. The result will show whether the strong momentum recorded at the beginning of the year was sustained, or whether rising global and domestic pressures have started to weigh more visibly on economic activities.Indonesia entered 2026 on relatively solid footing. Economic growth in the first quarter accelerated to 5.6 percent, above the post-pandemic average.
However, the external backdrop deteriorated rapidly. The United States-Iran war increased volatility in global financial and commodity markets. Higher oil prices raised concerns over imported inflation, production costs and fiscal pressures, while uncertainty over the direction of US monetary policy pushed global bond yields higher.
These developments strengthened the US dollar and encouraged investors to reduce exposure to emerging market assets. At the same time, several domestic developments put weight on investors’ confidence and added to capital outflow pressures. Concerns over fiscal policy, regulatory changes and policy coordination led investors to adopt a more cautious stance toward Indonesian assets.
These pressures were increasingly visible in Indonesia’s balance of payments. The current account deficit widened in the first quarter of 2026 to US$4 billion, equivalent to 1.1 percent of GDP. Meanwhile, the capital and financial accounts recorded a $4.9 billion deficit, reflecting capital outflow and an increase in the placement of financial assets abroad.
