Arnoldus Kristianus, Jakarta – Economists at Institute for Economic and Social Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) questioned the credibility of Indonesia's reported 5.61% economic growth in the first quarter of 2026, arguing that the figure was likely inflated by temporary factors and inconsistencies in official production data.

Indonesia's economy expanded 5.61% year-on-year in the January-March period, according to the Central Statistics Agency (BPS), with gross domestic product reaching Rp 6,187.2 trillion at current prices and Rp 3,447.7 trillion at constant prices.

However, LPEM FEB UI economist Teuku Riefky said the headline growth figure appeared difficult to reconcile with sectoral data released by BPS itself.

"The 5.61% growth figure was largely driven by temporary factors, and inconsistencies in BPS production-side data suggest the number is likely overstated," Riefky said in a report received on Wednesday.

Riefky pointed to what he described as a contradiction between manufacturing growth and utility sector performance. While BPS reported manufacturing expanded 5.04% in the first quarter, the electricity, gas, and water supply sector contracted 0.99%.

Manufacturing is Indonesia's largest electricity consumer, accounting for roughly 40-42% of national power usage. Industrial production activities – including machinery operations, smelting furnaces, assembly lines, and cooling systems – are heavily dependent on electricity supply.

"Logically, both cannot be true at the same time. If electricity supply declined, the manufacturing sector – the largest electricity consumer in the economy – could not physically grow by 5%," he said.

According to Riefky, the utilities category in BPS production data reflects value added generated by electricity producers, including state utility company PLN and independent power producers. A 0.99% contraction therefore indicates an overall decline in electricity production, which he said contradicted claims of strong manufacturing growth.

LPEM FEB UI estimated actual manufacturing growth was closer to 1.5%, which would place Indonesia's first-quarter economic growth at around 4.89%.

"We estimate manufacturing growth at 1.5%, resulting in first-quarter 2026 economic growth of 4.89% as a conservative midpoint estimate. This is not a single definitive figure, but the midpoint of an analytically defensible range fully based on BPS-published data," Riefky said.

The institute also highlighted a sharp increase in government consumption, which grew 21.81% in the first quarter. Riefky warned the surge may simply reflect a shift in spending from future quarters, given that the total 2026 state budget remained unchanged.

As a result, government consumption could become a drag on economic growth from the second through fourth quarters of 2026, potentially subtracting up to 0.5 percentage points from growth, he said.

"If government consumption is excluded from first-quarter 2026 economic growth, the economy would have grown only 4.62%," Riefky added.

Separately, Bagong Suyanto, writing in Investor Daily, said Indonesia's 5.61% growth was both an achievement and a warning sign because it occurred amid still-weak purchasing power.

"It signals structural inequality. Welfare cannot be measured solely by statistical figures, but by how stable people's jobs are, how affordable basic goods remain, and how evenly business opportunities are distributed in the labor market," Bagong wrote.

He said 2026 should become a turning point for improving the quality – not merely the quantity – of economic growth. While pursuing higher growth remained necessary, the structure of growth needed reform to reduce excessive dependence on vulnerable household consumption.

"Economic growth is happening, but the employment structure is shifting. Traditional labor-intensive sectors are slowing, while capital-intensive industries are growing but marginalizing local communities," Bagong said.

"As a result, a widening skill gap is making conventional workers harder to absorb into the labor market, ultimately triggering layoffs and unemployment," he added.

Source: https://jakartaglobe.id/business/lpem-feb-ui-questions-indonesias-reported-561-economic-growt