Ilona Estherina, Jakarta – The manufacturing sector remains the largest contributor to Indonesia's gross domestic product (GDP). However, the Institute for Economic and Social Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) noted a decline in its contribution.

The data was presented in the latest report titled "Macroeconomic Analysis Series Indonesia Quarterly Economic Review Q2 2026."

In the second quarter of 2026, the manufacturing sector contributed 19.8 percent to the total GDP. However, its share has decreased from above 20 percent in each of the three previous quarters.

"Meanwhile, its growth has also slowed to 4.52 percent year on year (yoy) in the second quarter of 2026 from 5.04 percent (yoy) in the first quarter of 2026," wrote the LPEM UI researchers in the report quoted on Friday, August 21, 2026.

LPEM UI attributed this slowdown in part to the manufacturing sector's growth of 5.68 percent (yoy) during the same period in 2025, which created a relatively high base. Additionally, the overall figure was weighed down by contractions in the coal and oil processing sectors, which declined by 3.97 percent (yoy) in the second quarter of 2026.

One reason for the contraction in the coal and oil processing sectors is the government's adjustment of coal production quotas, as stated in the 2026 Work Plan and Budget (RKAB). This plan aims to balance supply and support coal prices in the international market.

Furthermore, LPEM UI explained that excluding oil and gas processing, non-oil and gas manufacturing grew by 5.32 percent (yoy) in the second quarter of this year, slightly above the overall economic growth of 5.29 percent (yoy).

Previously, Statistics Indonesia (BPS) reported that the economic growth in the second quarter of 2026 was 5.29 percent (yoy). This figure exceeded the 4.80 percent estimate from LPEM UI. LPEM researchers believe that the difference of 0.49 percentage points between the two estimates requires a more in-depth analysis of the sources of growth.

Several indicators underlying LPEM UI's earlier assessment, particularly the slowdown in household consumption and some major sectors in general, did occur. However, government spending, which was stronger than expected, was considered to make a significant contribution to the overall growth figure.

Source: https://en.tempo.co/read/2118042/lpem-ui-manufacturings-contribution-to-indonesias-growth-fall