Towards 2026, business players assess that the direction of Indonesia's economic growth is starting to show signs of recovery despite global challenges. Sectors such as services, manufacturing, and agriculture are expected to be the main drivers of recovery.

Chairperson of the Indonesian Employers Association (Apindo) Shinta Kamdani assesses that Indonesia's economic conditions are starting to show signs of recovery ahead of 2026, although caution is still needed.

Indonesia's Manufacturing Purchasing Managers Index (PMI) in October 2025 rose to 51.2 and the retail sales index increased by 5.8% in October 2025, signaling that economic activity is starting to move positively. However, he cautioned that people's purchasing power is still weak as the household consumption and savings indexes declined, while corporate credit growth also slowed.

Shinta explained that the direction of economic growth is now shifting from labor-intensive sectors such as manufacturing to services and capital-intensive industries.

"The highest growth occurred in other services which reached 11.3%, company services 9.3%, and transportation and warehousing 8.5%," he said.

This shift is also evident from the heavy investment flows into machinery and equipment at 28.8% and into mining at 10%, reflecting the strong focus on resource-based industries with large capital.

The change in structure, for Shinta, has an impact on formal job creation. The contribution of the manufacturing sector to formal employment continues to decline, while the informal sector is increasing.

"In the past, an investment of Rp1 trillion could absorb 4,000 workers, but now only around 1,200 people," said Shinta.

This condition is exacerbated by the increase in youth unemployment which accounts for 67% of the total unemployed, indicating the need for policies to expand formal employment.

To strengthen the business sector, Shinta assessed that there are three strategic steps that need to be taken, namely providing business certainty, reducing production costs, and increasing people's purchasing power.

The ease of doing business in Indonesia still lags behind neighboring countries such as Vietnam and the Philippines due to the lengthy licensing process and high logistics and energy costs. "To get an AMDAL, 38% of companies wait more than a year," said Shinta.

Predicted economic sectors in 2026

Shinta sees a number of sectors as having great potential to drive growth in 2026. The manufacturing industry began to recover with growth of 5.68% in the second quarter of 2025, surpassing the pace of the national economy.

The agriculture sector also showed a surge of 10.52%, while real estate grew 3.71% after being depressed. The construction sector could be the locomotive of recovery as the housing backlog is high.

In addition, Shinta emphasized the importance of developing the green economy, downstreaming, and the digital economy as new growth engines. "Green jobs can reach 1.7 million jobs and contribute up to Rp600 trillion to GDP," she said. 

Great potential also exists in downstream agriculture and aquaculture such as seaweed, which Apindo is currently working on.

"I think this will be the next CPO," he said.

Shinta hopes that collaboration between the government, state-owned enterprises and the private sector can strengthen investment flows to ensure Indonesia's economic transformation is sustainable.

In line with businesses' views on the importance of downstreaming and value-added industries, PT Freeport Indonesia Vice President Corporate Communication Katri Krisnanti explained that copper is a strategic metal for the future of the global economy.

"Copper is the metal of the future as it plays an important role in the ecosystem of electric vehicles and renewable energy," he said.

Freeport's smelter in Gresik, which began operating in 2024, is a tangible manifestation of downstreaming, with the capacity to process 3 million tons of copper concentrate per year and produce copper cathode, gold and silver bars in the country.

Katri explained that the investment in the construction of the smelter reached 4.2 billion dollars or around Rp68 trillion and has placed Indonesia in fifth place in the world's copper cathode producers.

"Indonesia produces around 1.1 million tons of copper cathode per year, and proudly, the mines and smelters are both located in Indonesia," he said.

Freeport's contribution in 2024 is recorded at Rp80 trillion to the state, including Rp12 trillion to local governments, and around 0.75% to national GDP.

Katri said the sustainability of the national economy depends on the ability to manage resources wisely. Freeport is committed to continue investing around Rp15 trillion per year until 2041 as well as implementing various energy efficiency initiatives.

"We are targeting a 30% reduction in emissions from 2018 to 2030, and by 2024 we will have achieved 31%," he said. Efforts are made through the use of underground electric trains, optimization of power plants in Papua, and a more energy-efficient concentrate drying mechanism.

Prepare the growth engine for 2026

Director General of Economic and Fiscal Strategy at the Ministry of Finance Febrio Nathan Kacaribu emphasized the importance of building trust and evidence-based narratives to sustain economic growth.

According to him, 2026 will still be characterized by global uncertainty, ranging from the US trade war with China to conflicts in Ukraine and the Middle East. Even so, Indonesia is considered quite resilient with stable growth in the range of 5%. "This year we are not bad at all," he said.

Febrio said various indicators show economic resilience, including the manufacturing PMI which is expanding again and the state bond market which shows high investor confidence. "Our SBNyield is at 5.91%, the lowest since 2021, and the gap with US dollar bonds is only about 200 basis points." This condition, according to him, reflects increasing global confidence in Indonesia's ability to manage fiscal amid uncertainty.

During 2025 the government has taken various measures to strengthen the growth engine, including moving IDR200 trillion of government funds from Bank Indonesia to banks to lower banks' cost of funds and accelerate lending.

The move, Febrio continued, succeeded in reducing deposit rates by around 50 basis points and lending rates by 11 basis points in the first two weeks of implementation. The government also prepared a Rp31.8 trillion stimulus for low-income people to maintain consumption in the final quarter of 2025.

Looking ahead to 2026, Febrio targets economic growth of 5.4% with the support of SOE and private investment. SOE investment, which is now consolidated through Danantara, will be the main driver in the downstream sector, high value-added manufacturing, infrastructure, agriculture, and the digital economy.

"The strategy later in 2026, especially for the state budget, is to spend more early to build positive market sentiment and maintain sustainable economic growth," he said. 

Meanwhile, Bank Mandiri Chief Economist Andry Asmoro assessed that Indonesia does need to grow the economy above 5% so as not to lag behind neighboring countries. He cited Vietnam, which recorded 8% growth with a target of 10%, while Indonesia only reached 5.04% in the third quarter of 2025.

"The government needs to encourage growth of 5.5% in the fourth quarter," he said. According to him, efforts towards higher growth need to be focused on sectors that have a large contribution to the economy.

According to Andry, the three sectors that need to be strengthened are the manufacturing industry, agriculture, including forestry and fisheries, and trade. Downstreaming has so far focused on the mining sector, while agricultural sectors such as cocoa, coffee and cloves have great potential to generate added value.

"In 2026 we should no longer have a consolidation story like 2025, we can immediately accelerate," he said. The readiness of human resources, he said, is an absolute requirement for sustainable economic growth.