Indonesia's Economy Grows 5.29% in Q2, Beating Forecasts but Slowing from Q1

The Headline Number

Indonesia's gross domestic product grew 5.29% year-on-year in the second quarter of 2026, Statistics Indonesia (Badan Pusat Statistik, or BPS) announced on August 5. The reading beat the 5.12% growth recorded in the second quarter of 2025, but represented a slowdown from the 5.61% pace Indonesia posted in the first quarter of this year.

Sizing the Economy

BPS put Indonesia's GDP at current market prices at 6,552.1 trillion rupiah for the quarter, with GDP at constant prices reaching 3,576.2 trillion rupiah. On a quarter-on-quarter basis, comparing Q2 directly against Q1 2026 without adjusting for the year-earlier base, BPS reported growth of 3.73%, a jump that reflects normal seasonal patterns in Indonesia's quarterly output rather than a sudden acceleration.

Manufacturing Leads, Utilities Sprint Ahead

Manufacturing remained the largest single contributor to Indonesia's growth, a role it has held for multiple quarters given its size within the economy. In percentage-growth terms, however, the fastest-expanding sector was electricity and gas, which grew 10.81% year-on-year. BPS attributed this to rising electricity sales across household, business, and industrial customer segments, a signal of broadening domestic demand for power that typically tracks broader economic activity.

The One Sector That Shrank

Mining and quarrying was the sole major sector to contract in the second quarter, according to BPS's release. The agency did not attribute the contraction to a single cause in the topline figures presented at Wednesday's briefing, though commodity-linked sectors such as mining are typically more exposed to swings in global prices than domestically driven sectors like utilities or construction.

Reading the Slowdown from Q1

The deceleration from 5.61% in Q1 to 5.29% in Q2 is a moderation, not a reversal. Indonesia's growth rate remains solidly above 5%, a threshold the country's policymakers have long treated as a marker of healthy expansion. Base effects from the prior year's Q2 reading, along with the natural quarter-to-quarter variability in a large, diverse economy, likely explain more of the change than any single new headwind.

Regional Context

The reading keeps Indonesia, Southeast Asia's largest economy by GDP, among the stronger growth performers in the region for 2026, at a time when several major economies elsewhere in Asia and Europe have posted slower or contracting activity this year.

Reader Q&A

Q: What's the difference between Indonesia's year-on-year and quarter-on-quarter growth figures?

A: The year-on-year figure (5.29%) compares Q2 2026 to Q2 2025, filtering out seasonal patterns. The quarter-on-quarter figure (3.73%) compares Q2 2026 directly to Q1 2026, which can look larger because it reflects normal seasonal swings rather than a distinct acceleration.

Q: Why did mining contract while other sectors grew?

A: BPS did not detail a specific cause in its topline release, but mining and quarrying tend to be more exposed to swings in global commodity prices than domestically driven sectors like utilities, construction, or retail trade.

Q: Is 5.29% growth considered strong for Indonesia?

A: Yes. Indonesian policymakers have generally treated growth above 5% as a marker of healthy expansion, and the reading keeps Indonesia among Southeast Asia's stronger-growing economies in 2026.

Q: What drove the fast growth in the electricity and gas sector?

A: BPS attributed the sector's 10.81% year-on-year growth to rising electricity sales across household, business, and industrial customers, which typically signals broader economic activity.

Q: Why did growth slow from 5.61% in Q1 to 5.29% in Q2?

A: BPS's release did not single out one cause; a mix of base effects from the year-earlier comparison period and normal quarter-to-quarter variability in a large, diversified economy are the most likely explanations rather than any singular new headwind.