World Bank Lowers Indonesia’s 2026 Growth Forecast

The World Bank has lowered its economic growth projection for Indonesia for 2026 to 4.7 percent, marking a decrease from the 4.8 percent estimate published in October 2025. The revised forecast was detailed in the April 2026 edition of the East Asia and Pacific Economic Update, released on April 8, 2026.

The institution attributed the slowdown to headwinds stemming from elevated global oil prices and a risk-off sentiment characterized by heightened investor caution in global financial markets. This new projection is lower than Indonesia’s most recent growth rate of 5.1 percent.

Government Response and Economic Strategy

Finance Minister Purbaya Yudhi Sadewa, who also serves as the state treasurer, challenged the World Bank’s assessment on April 9, 2026, in Jakarta. Purbaya described the calculation of Indonesia’s economic outlook as less precise and argued that the World Bank failed to fully capture the government’s strategies to support the economy.

Purbaya indicated that the downgraded forecast was largely driven by high oil prices. He suggested that if oil prices return to normal levels within the following month, the World Bank would likely revise its forecast again. He expressed confidence that growth would rebound as the government maintains stability and encourages investment.

The Finance Minister emphasized that the administration is focused on ensuring financial conditions and policies remain supportive of growth. He specifically noted the importance of advancing beneficial programs and improving the investment climate. Purbaya also suggested that the World Bank may not have accounted for the economic strategies being pursued by President Prabowo Subianto’s administration.

Regional Outlook and Future Projections

The World Bank’s report indicates a broader slowdown across the East Asia and Pacific region for 2026. Regional growth is projected to ease to 4.2 percent in 2026, down from 5.0 percent in 2025. The institution cited an energy shock triggered by conflict in the Middle East, alongside rising trade barriers, international policy uncertainty, and domestic economic challenges.

Aaditya Mattoo, the World Bank Research Group Director, stated that while the region has shown resilience in the past, current conditions could increase economic burdens and hinder productivity growth.

Despite the 2026 slowdown, the World Bank expects Indonesia’s growth to rebound to 5.2 percent in 2027. This projected recovery is expected to be supported by a more accommodative monetary policy and investment from Danantara.

Comparative Economic Context

The World Bank’s 4.7 percent projection for 2026 falls below the Indonesian government’s own target of 5 percent. This follows a trend of downgrades from other global institutions; for example, the International Monetary Fund (IMF) had previously projected Indonesia’s growth at 4.7 percent for both 2025 and 2026 in its April 2025 World Economic Outlook report.

The IMF’s earlier analysis highlighted the impact of U.S. Tariff adjustments on emerging Asian countries, particularly those within the Association of Southeast Asian Nations (ASEAN). At that time, the IMF noted that Indonesia’s growth figures were not significantly different from other developing Asian nations, such as Vietnam and Malaysia, which were also facing pressures from trade tensions and policy uncertainty.