Indonesia posts fastest first-quarter growth in 3 years, but headwinds loom

Indonesia’s economy grew 5.6 per cent during the first quarter of 2026, its fastest pace in more than three years, but analysts warn that the coming months will pose significant tests for Southeast Asia’s biggest economy.Statistics body BPS attributed the growth to robust household consumption – which made up 54.36 per cent of gross domestic product and grew by 5.52 per cent year-on-year – and a surge in government spending.Amalia Adininggar Widyasanti, head of BPS and deputy minister for economic affairs at the Ministry of National Development Planning, told reporters on Tuesday that increased spending during the Muslim holy month of Ramadan and Eid ul-Fitr-related travel between mid-February and March had boosted growth.Government spending also surged 21.8 per cent in the first quarter, thanks to President Prabowo Subianto’s priority programmes such as free nutritious meals, Red and White Village Cooperatives, and religious holiday bonuses for civil servants, BPS said.The growth rate, the fastest since the third quarter of 2022, exceeded the 5.3 per cent predicted by analysts polled by Reuters.People buy clothes such as hijabs at a market in preparation for Eid ul-Fitr in Banda Aceh, Indonesia, on March 16. Photo: EPA“The 5.6 per cent growth was above my expectation of 5.3 per cent, but not entirely surprising given the strong growth in government spending throughout the first quarter,” David Sumual, chief economist at Bank Central Asia, told This Week in Asia.