Indonesia’s GDP rose 5.4% year-on-year in Q4-2025, the fastest pace since 2022. Full-year 2025 growth was 5.1%, supported by domestic demand and stronger household consumption.
The 2026 GDP growth forecast is kept at 5.2%. Drivers include a stronger fiscal impulse and more spending on government priority areas.
Priority investment areas include mineral processing, energy and food sectors, and military spending. Monetary conditions remain loose, inflation is contained, and the labour market is recovering modestly, supporting household consumption.
Growth may be uneven due to cautious private investment linked to perceived policy uncertainty. Exports are expected to ease further on softer external demand and plans to reduce production of key minerals to address global supply and demand imbalance.
A relatively weak Indonesian rupiah (IDR) could improve the competitiveness of non-commodity exports. The article notes it was created with the help of an Artificial Intelligence tool and reviewed by an editor.
Based on the strong 5.4% year-on-year GDP growth we saw in the final quarter of 2025, the momentum for domestic-focused assets appears solid. This growth, the fastest since 2022, was primarily driven by household consumption. As we look ahead in 2026, the forecast for 5.2% growth suggests this domestic theme will continue.
We should consider positioning for continued weakness in the Indonesian Rupiah. With Bank Indonesia holding its benchmark rate at 6.00% in its January 2026 meeting to support growth and inflation under control at 2.7% last month, monetary policy remains loose. This environment, coupled with a strong US dollar, suggests that options strategies betting on the USD/IDR moving past the 15,850 level could be profitable.
The equity market presents a more nuanced opportunity, requiring a focus on specific sectors. Cautious private investment and softer exports will likely weigh on the broader Jakarta Composite Index (JCI), which has been trading in a tight range so far this year. We see value in overweighting sectors poised to benefit from government spending, such as construction, military suppliers, and food producers, while underweighting export-oriented manufacturers.
There is a clear signal in the commodity space, especially concerning industrial metals. Given government plans to reduce the production of key minerals like nickel to manage global supply, we should anticipate upward pressure on prices. With nickel prices on the LME already up 4% since the start of the year, buying call options on nickel futures seems like a logical way to trade this expected supply constraint.
Finally, the stated “policy uncertainty” is a direct signal to expect increased market volatility. This makes trading volatility itself an attractive strategy. We can use derivatives like straddles on the JCI index ahead of key government fiscal announcements to profit from a significant price move, regardless of the direction.
