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Jakarta, June 15, 2026 – Indonesia’s economy posted robust growth in the first quarter of 2026, yet beneath the headline numbers lies a troubling trend the country’s middle class is shrinking.
The World Bank, in its latest Indonesia Economic Prospects report, cautioned that while jobs are being created, they are not of sufficient quality to sustain upward mobility, raising concerns about long-term social and economic stability.
Growth Momentum
Indonesia’s gross domestic product expanded 5.6 percent year-on-year in Q1 2026, marking the strongest pace since mid-2021.
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Household consumption surged, buoyed by seasonal spending during Ramadhan and Idul Fitri, alongside government stimulus programs such as Makan Bergizi Gratis (MBG).
Investment climbed 6 percent, reflecting renewed confidence in manufacturing and infrastructure.
Services remained the backbone of growth, contributing 57 percent, with trade, transport, hospitality, finance, and information technology leading the charge.
Manufacturing also showed resilience, driven by metals (up 10.3 percent) and electronics (up 7 percent), signaling diversification beyond commodity reliance.
Warning Signs
Despite these gains, the World Bank underscored a structural weakness: Indonesia’s labor market is not generating enough high-quality, high-wage jobs.
“The economy creates jobs, but not enough productive employment to expand the middle class,” the report noted.
This imbalance threatens Indonesia’s consumption-driven growth model.
A shrinking middle class reduces purchasing power, undermining the very segment that has historically fueled domestic demand.
Without corrective measures, the country risks entrenching inequality and limiting social mobility.
The report highlighted several pressing issues.
Many new jobs are concentrated in low wage service sectors, offering limited prospects for income growth.
Rising oil prices, driven by Middle East conflicts, and global financial volatility pose inflationary risks.
Weak wage growth and limited access to high-productivity employment hinder upward mobility, leaving many households vulnerable.
To counter these risks, the World Bank urged Indonesia to focus on expanding opportunities in manufacturing, technology, and advanced services.
Strengthening vocational training and higher education to align workforce skills with industry demand.
Sustained investment in social programs and infrastructure to cushion vulnerable households while stimulating growth.
Policies such as wage incentives, tax relief, and targeted subsidies to stabilize purchasing power.
Indonesia enters mid-2026 with strong growth momentum, yet the shrinking middle class poses a structural threat.
If left unaddressed, this imbalance could erode consumer demand the engine of Indonesia’s economy.
Policymakers face a delicate challenge sustaining growth while ensuring prosperity translates into inclusive upward mobility.
