-- Boosted in part by government outlays, Indonesia's gross domestic product (GDP) expanded by 5.61% on year in the first quarter, reported the Central Statistics Agency on Tuesday.
Southeast Asia's largest economy logged the biggest annual expansion since 2022, but some experts warned the growth could lag in coming seasons as the national government tempers outlays, and as higher energy bills sap businesses and consumers.
Government outlays rose 21.8% on year in the first quarter as Jakarta ramped up flagship social-welfare programs, including a free-meal scheme and village cooperative funding, to spur household consumption.
The national government also spent briskly during the first quarter to support outlays during the fasting month of Ramadan, and the Eid al-Fitr holiday, when many businesses are closed.
Despite challenges, the Indonesian economy may still grow by a relatively robust 5% for the full 2026 year, said economists with Maybank (Malayan Banking Berhad), which is Malaysia's largest bank.
Headwinds to Indonesian economic growth are likely to intensify in the second quarter, with exports hampered by cost pressures on international trade, said Brian Lee and Hak Bin Chua, analysts at Maybank, reported the Singapore-based The Business Times.
Higher fuel prices and a weakening Indonesian currency, the rupiah, are likely to push up import bills going forward, added the analysts.
There are also concerns that Indonesian national government is engaged in unsustainable spending.
"A team of economists from the Macroeconomic, Finance and Political Economy Research Group at University of Indonesia noted that the government is continuing to roll out fiscally costly flagship programs, including a nationwide free-meal initiative," reported The Business Times.
Concerns over fiscal outlays and government borrowing have also unsettled financial markets, including negative comments from credit-rating agencies Moody's and S&P Global Ratings, noted The Business Times.
In Mid-April, S&P Global assigned a "BBB/A-2" rating to Indonesian bonds, with BBB- being the lowest rating for an "investment grade" government bond.
If Indonesia national debt levels continue to rise, the BBB rating could be lowered, said S&P Global.