Berita Baru, Jakarta – Five civil society organizations and independent research institutions have assessed that Indonesia’s 5.61 percent economic growth in the first quarter of 2026 has yet to reflect a tangible improvement in people’s living conditions. In a joint statement released on Thursday (July 2, 2026), they argued that the growth was still driven by seasonal factors and had failed to address the structural challenges facing the national economy.
The coalition, comprising the International NGO Forum on Indonesian Development (INFID), Publish What You Pay (PWYP) Indonesia, The PRAKARSA, Sahita Institute (HINTS), and the Institute for Development of Economics and Finance (INDEF), stated that various indicators show that Indonesians continue to face weakening purchasing power, job insecurity, and increasingly constrained fiscal space.
“Behind the claim of high economic growth, millions of people continue to face weakening purchasing power, informal employment, mounting household debt, and shrinking fiscal space,” the coalition said in its joint press release issued on Thursday (July 2, 2026).
The coalition argued that economic growth in the first quarter was largely driven by increased government spending ahead of the Eid holiday, including the payment of the 13th-month salary for civil servants, and therefore did not reflect a strengthening of the economy’s underlying fundamentals.
INDEF noted that a 21.8 percent increase in government expenditure was the primary driver of gross domestic product (GDP) growth during the first quarter.
“Growth in Q1 2026 is artificial and unsustainable,” INDEF stated in the document.
According to the coalition, one of the clearest signs of economic distress is the continued decline of Indonesia’s middle class. Citing data from the Mandiri Institute, the coalition noted that the number of middle-class Indonesians fell from 47.9 million people in 2024 to 46.7 million in 2025. At the same time, approximately 142 million people now belong to the aspiring middle class—those living only slightly above the poverty line and highly vulnerable to falling back into poverty in the event of an economic shock.
The coalition also highlighted the growing dependence of households on debt. Outstanding online lending reportedly increased by 25 percent to IDR 96.6 trillion, while financing through pawn services rose by 48 percent to IDR 130 trillion. According to the coalition, this trend indicates that many households are sustaining consumption through borrowing rather than through rising incomes.
Another major concern is the condition of the labor market. The coalition recorded that 88,519 workers lost their jobs throughout 2025, with an additional 23,470 workers laid off between January and May 2026.
In their view, although investment realization has continued to increase, it has failed to generate quality employment because investments remain concentrated in capital-intensive sectors. As a result, around 60 percent of Indonesia’s workforce remains employed in the informal sector, earning an average monthly income of approximately IDR 1.9 million.
Beyond household economic conditions, the coalition also criticized the government’s fiscal policies. INFID expressed its support for a judicial review of Law No. 17 of 2025 on the 2026 State Budget (APBN) before the Constitutional Court. According to INFID, the inclusion of IDR 223.5 trillion allocated to the National Nutrition Agency for the Free Nutritious Meals Program as part of the education budget should be tested against the constitutional requirement mandating that at least 20 percent of the state budget be allocated to education.
Meanwhile, PWYP Indonesia argued that non-tax state revenue from the natural resources sector still fails to reflect the environmental and social costs generated by extractive industries. Sahita Institute also warned that the reallocation of IDR 308 trillion in efficiency savings to the Danantara Sovereign Wealth Fund should be accompanied by robust accountability mechanisms, including independent audits, transparent financial reporting, and effective public oversight.
The five organizations concluded their statement by urging the government and the House of Representatives to strengthen social protection for vulnerable groups, restore education spending in line with the constitutional mandate, improve transparency and accountability in the management of Danantara, adopt a more progressive taxation system, and ensure that downstream natural resource policies do not impose disproportionate social and ecological burdens on communities in producing regions.
According to the coalition, economic growth should not be measured solely by the size of GDP, but by its ability to create decent jobs, strengthen household purchasing power, and reduce the vulnerability of millions of Indonesians to poverty.
Source: BeritaBaru.co