Indonesia’s economy is expanding at 5.2 percent in 2026 according to the Asian Development Bank, making it the second-fastest-growing major Southeast Asian economy after Vietnam and reflecting the continued momentum of the structural transformation that President Joko Widodo began and that President Prabowo Subianto, who took office in October 2024, has pledged to accelerate. Prabowo’s economic strategy combines continuation of Jokowi’s nickel downstream industrialization policy – which prohibits raw nickel ore exports and requires processing within Indonesia to capture more battery metal value – with an ambitious infrastructure investment program targeting completion of the Nusantara capital relocation project, expansion of the national railway network, and development of industrial parks in eastern Indonesia. The downstream industrialization strategy has made Indonesia a central node in the global electric vehicle battery supply chain, attracting major investment from South Korean battery companies, Chinese EV manufacturers, and Western firms diversifying battery material sourcing from China-only supply chains.

Indonesia’s growth performance in 2026 is solid but slightly below the 5.3-5.5 percent projections made before the Iran war created additional headwinds through higher oil prices. Indonesia is a net oil importer – a structural shift from its earlier history as an OPEC member – and elevated global oil prices from Strait of Hormuz disruption added approximately 0.2-0.3 percentage points of headwind through higher energy subsidies and inflation. The Prabowo government has maintained fuel subsidies at elevated levels to protect lower-income households from the full impact of global oil price increases, a fiscally costly decision reflecting both economic prudence and the political imperative of managing cost-of-living concerns in a population of 280 million. Indonesia’s role as a key ASEAN diplomatic partner and as host of the 2023 G20 gives it an outsized voice in regional economic discussions, and Prabowo has been an active participant in the multilateral forums where Indonesia’s interests as a major commodity exporter and manufacturing destination are at stake.