ASIATODAY.ID, JAKARTA — Indonesia’s economic momentum is facing a confidence test as businesses grow more cautious amid currency pressure, regulatory uncertainty and a slower investment appetite in the second quarter of 2026.
The latest Kadin Business Pulse Q2 2026 survey by the Indonesian Chamber of Commerce and Industry (Kadin) Institute reveals that while Indonesia’s economic fundamentals remain resilient, companies are calling for stronger policy certainty and faster execution to maintain growth momentum.
The survey, titled “Business Resilience Amid Rupiah Weakness and Opportunities from ICA-CEPA,” captures the views of businesses across sectors, ranging from micro, small and medium enterprises (MSMEs) to large corporations.
Kadin Chairman Anindya Novyan Bakrie said global investors have moved beyond questioning Indonesia’s economic potential. The focus has now shifted toward Indonesia’s ability to execute policies, provide regulatory certainty and build the human capital needed for long-term growth.
“International investors already understand Indonesia’s potential. The question now is whether Indonesia can execute its policies, create certainty and prepare the talent needed to achieve Indonesia Emas,” Anindya said.
Confidence Declines as Businesses Face Multiple Pressures
The Kadin survey shows business sentiment weakened in Q2 2026 compared with the previous quarter, driven by several factors, including rupiah depreciation, geopolitical uncertainty, rising energy costs, regulatory challenges and uneven consumer purchasing power.
Kadin Indonesia Institute Executive Director Mulya said the weakening rupiah and uncertainty over fiscal policy direction have become the biggest concerns among businesses.
“The main concerns are the increase in operational costs caused by rupiah pressure and the need for clearer policy direction,” he said.
The survey recorded several key findings:
– 47.1 percent of businesses said their conditions deteriorated in Q2 2026, compared with 40.5 percent in Q1 2026.
– Businesses reporting improvement declined to 22.8 percent, from 25.2 percent in the previous quarter.
– 50.6 percent of SMEs reported worsening business conditions, making them the most vulnerable segment.
– The industrial sector faced stronger pressure, with 51.8 percent of companies reporting weaker conditions.
– 43.5 percent of businesses said they have no investment plans in the next six months, reflecting a more cautious outlook.
The investment slowdown was particularly visible among SMEs, where 58.4 percent indicated they were not planning expansion, highlighting the need for stronger support in financing access and market opportunities.
Policy Certainty Becomes Indonesia’s Investment Priority
For businesses, the challenge is not only external pressure but also domestic policy predictability.
Kadin found that bureaucracy and regulatory issues became a major concern, rising to 16.4 percent from 14.3 percent in the previous quarter.
Strategic industries, including commodity-based sectors, are seeking clearer regulations to ensure investment continuity and maintain export competitiveness.
Kadin emphasized that restoring business confidence requires four key steps:
– Maintaining rupiah stability;
– Strengthening regulatory certainty;
– Providing a clearer and credible fiscal policy framework;
– Increasing purchasing power through effective economic policies.
Indonesia Still Holds Global Growth Opportunities
Despite weaker sentiment, Kadin sees significant opportunities ahead as global market conditions improve.
The survey showed that market development remained the strongest source of optimism among businesses, reaching 26.6 percent, supported by improving international demand and easing geopolitical risks.
Anindya said Indonesia must maximize its international trade agreements, including the Indonesia-Canada Comprehensive Economic Partnership Agreement (ICA-CEPA), to expand export opportunities.
However, he warned that many businesses have yet to fully understand how to benefit from these agreements.
“Around 80 percent of businesses are still not familiar with how to utilize CEPA opportunities. This is a major opportunity that must be expanded, especially for SMEs,” he said.
Kadin encouraged businesses to accelerate efficiency, adopt new technologies, protect employment and expand into global markets.
From Natural Resources to Human Capital Economy
Anindya highlighted that Indonesia is entering a new stage of economic transformation — moving beyond a natural resources-based model toward a human capital and innovation-driven economy.
The transition, he said, requires stronger investment in skills, productivity and technology.
“Every transformation brings challenges. The key is preparing our people to compete in the future economy,” he said.
Investor Confidence Depends on Execution
The Kadin Business Pulse Q2 2026 highlights a critical message for Indonesia: economic potential alone is no longer enough.
As Southeast Asia’s largest economy continues its transformation, investors are watching how effectively Indonesia can translate ambitious policies into concrete results.
With strong fundamentals, abundant resources and a growing market, Indonesia remains an attractive destination — but maintaining confidence will depend on regulatory consistency, policy execution and the ability to turn opportunities into sustainable growth. (AT Network)
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