Jakarta. The Asian Development Bank (ADB) predicts that Indonesia’s economy will grow by 5.2% this year, beating close neighbor Malaysia’s 4.6%.

The Manila-based lender has raised its growth outlook for Indonesia compared to the previous forecast of 5.1% made in December. Indonesia’s gross domestic product (GDP) will also expand at 5.2% in 2027.

In its latest Asian Development Outlook report published on Friday, the bank said that Indonesia had gained an early momentum this year, partially thanks to the Ramadan and Eid festivities. Indonesia is the world’s largest Muslim-majority country. The Ramadan season has been synonymous with rising household consumption as people spend a lot in food and homecoming trips.

"Unless the conflict in the Middle East becomes prolonged and worsens, early growth momentum may be sustained," the ADB wrote.

“Progress in mineral processing, manufacturing, and related supply chains should continue to crowd in domestic and foreign investment, supporting formal job creation.”

The report shows that Indonesia is the second-fastest-growing economy in the Developing Southeast Asia group.

Malaysia’s 2026 growth projection stands at 4.6%, and will slow to 4.5% in 2027. The 2026 figure indicates a 0.1 percentage-point increase from December’s forecast. However, both countries still have a long way to go to catch up to fellow ASEAN member Vietnam whose forecasts are within the 7-percent mark for both years.

ADB latest projections mean that Indonesia falls short of its target. 

The World Bank has recently trimmed its 2026 outlook for Indonesia from 4.8% to 4.7%. 

Despite the downgrade, senior economic minister Airlangga Hartarto said Thursday that Indonesia would stick to the 5.4% growth target for 2026. He was confident that the economy could grow by at least 5.5% in the first quarter alone, while admitting that the figure could hinge on the Iran war as a fragile two-week truce between the US and Tehran is currently in place.

“All this still depends on the geopolitical situation, whether things will be stable or not. The war is still ongoing, and there will be new dynamics within these two weeks. We are constantly adjusting to the dynamics,” Airlangga told the press.