Indonesia’s GDP grew 5.4% year on year in Q4 2025, the fastest pace since 2022. Growth for the full year 2025 was 5.1%, helped by strong domestic demand and rising household spending.
The GDP growth forecast for 2026 stays at 5.2%. Key drivers are a stronger fiscal boost and higher spending on government priorities.
Priority investment areas include mineral processing, energy, food, and military spending. Monetary policy is still supportive, inflation remains under control, and the labour market is improving slowly. These factors should keep household consumption steady.
Growth may be uneven. Private investment could stay cautious because of policy uncertainty. Exports are also expected to slow as global demand weakens and the government plans to cut output of key minerals to help balance world supply and demand.
A weaker Indonesian rupiah (IDR) could make non-commodity exports more competitive. The article also 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 in Q4 2025, domestic-focused assets have solid momentum. This was the fastest growth rate since 2022 and was mainly driven by household consumption. Looking into 2026, the 5.2% growth forecast suggests this domestic trend should continue.
We should also plan for further weakness in the rupiah. Bank Indonesia kept its benchmark rate at 6.00% at its January 2026 meeting to support growth. With inflation at 2.7% last month, policy remains loose. Combined with a strong US dollar, this backdrop supports options strategies that benefit if USD/IDR moves above 15,850.
Equities require a more selective approach. Softer exports and cautious private investment may limit gains in the broader Jakarta Composite Index (JCI), which has traded in a narrow range so far this year. We see potential in overweighting sectors that could benefit from government spending, such as construction, military suppliers, and food producers, while underweighting export-focused manufacturers.
In commodities, the signal is clearer, especially for industrial metals. If the government cuts production of key minerals like nickel to tighten supply, prices may rise. With LME nickel already up 4% since the start of the year, call options on nickel futures offer a direct way to express this view.
Policy uncertainty also points to higher volatility. That makes volatility strategies more attractive. For example, JCI straddles ahead of major fiscal announcements could profit from a large market move in either direction.
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