BI Sees Limited Global Growth Amid Rising Geopolitical Risks

RRI.CO.ID, Jakarta - Bank Indonesia (BI) expects global economic growth to remain weak in 2026, with financial‑market uncertainty still elevated amid intensifying geopolitical tensions.

Acting BI Governor Destry Damayanti said the ongoing conflict in the Middle East is pushing up oil and other global commodity prices. “Global economic growth in 2026 will not be strong, estimated at around 3 percent,” Destry said during a press conference following the BI Board of Governors’ Meeting (RDG) in Jakarta on Wednesday, August 19, as quoted by Antara.

She noted that global inflation is projected to stay high at around 4.5 percent in 2026, prompting central banks worldwide to adopt tighter monetary policies.

In the United States, the Fed Funds Rate is expected to rise again in the fourth quarter of 2026. US Treasury yields are also projected to remain elevated amid expectations of further rate hikes and a persistently wide US fiscal deficit.

These developments have kept uncertainty high in global financial markets. Investor appetite for emerging‑market portfolio assets remains subdued, while the US dollar continues to strengthen against both advanced‑economy and emerging‑market currencies.

BI assesses that these global conditions require a stronger and more coordinated policy response. Fiscal and monetary policy alignment is needed to reinforce external resilience, maintain stability, and support Indonesia’s economic growth.

Despite external pressures, Indonesia’s economy continues to expand. The national economy grew 5.29 percent year‑on‑year in the second quarter of 2026, slightly lower than the 5.61 percent recorded in the previous quarter.

This growth was supported by fiscal stimulus that boosted government consumption and investment. Government spending increased through the payment of the 13th‑month salary and spending on goods and services for the Free Nutritious Meals (MBG) program.

Household consumption remained stable, though BI said it still needs strengthening. The central bank also emphasized the importance of increasing exports to reinforce the structure of national economic growth.

“In the future, economic growth is expected to remain strong, supported by the implementation of various government stimulus programs and sustained confidence among economic actors,” Destry said.

BI will continue its mix of monetary, macroprudential, and payment‑system policies to maintain momentum. These policies will be closely coordinated with the government to preserve stability and support economic growth.

“BI projects Indonesia’s economic growth in 2026 to be in the range of 4.9 to 5.7 percent,” said Destry. ***