Jakarta. The Indonesian Employers Association, or Apindo, projects the national economy to expand between 5.0 percent and 5.4 percent year-on-year (yoy) in 2026, as the group doubts the Sumatra floods will take a dramatic toll on the national gross domestic product (GDP).

According to Apindo’s estimates, the Q1 festivities will be a major GDP growth driver in 2026. The January-March period encompasses the New Year's holiday, the fasting month, as well as Eid -- all of which are synonymous with a surge in consumer spending. The Chinese New Year celebrations fall within the same quarter. Apindo warned of slowdowns in Q2 and Q3 2026, due to the lack of seasonal drivers, especially if the government doesn’t make any policy interventions.

“We believe that our economy will grow between 5.0 percent and 5.4 percent yoy next year. Why the long range? … Domestic situation may have improved, but there are still many global uncertainties,” Apindo’s chairwoman Shinta Kamdani told a press briefing in Jakarta on Monday, alluding to US tariffs.

Apindo sets its 2025 full-year outlook at a range of 5.0 and 5.2 percent yoy. Indonesia will largely bank on the year-end holiday spending to ramp up the Q4 GDP, which Apindo believes can rise by between 5.1 and 5.3 percent yoy. This is a more modest Q4 figure compared to economic tsar Airlangga Hartarto’s 5.4-5.6 percent.

The Jakarta Globe asked Shinta whether Apindo had considered the floods and landslides that had devastated the island of Sumatra in their calculations. 

Shinta admitted that Apindo had yet to fully evaluate the disaster’s impact on the 2026 outlook, as companies were still focusing on the emergency responses. She then named local small-sized enterprises to be the worst-hit as they lost their market and supplies, judging by the group's initial mapping of the disaster. The floods, too, strip processing industries of access to raw materials. They have ruined farmlands, setting a nightmare for agribusinesses. However, the extent of the impact will likely not be significant enough to weaken the nationwide economy.

“All these conditions will trigger supply shocks and suppress regional output. It will likely even lead to logistic cost hikes. But will it affect the overall [national] growth? Do remember that it’s not just one factor that makes up economic growth,” Shinta said.

“So we doubt that an impact to the consumption in the aforementioned [disaster-struck] areas will deal a substantial blow to the overall economy, at least based on what we have seen so far. … But of course, the government still needs to allocate some budget to speed up the [infrastructure] recovery in the affected regions.”

Shinta’s comment reflects a more optimistic tone compared to the economic think-tank Celios.

The latter’s latest report warned that the financial losses in the disaster-struck Sumatra extend to other parts of the country, even the capital Jakarta. Celios said that Indonesia’s economy could shrink by Rp 68.67 trillion ($4.1 billion). This is equivalent to a 0.29 percent decline in the national GDP. Despite being far from the disaster site, the metropolis Jakarta is expected to lose Rp 1.88 trillion as the Sumatra floods interrupt the flow of goods and raw materials.

As of Monday at 7.55 p.m., the Sumatra flooding has killed at least 961 people. The catastrophe has resulted in 157,600 damaged houses, as well as 1,200 destroyed public facilities, local authorities reported.

Early government estimates revealed that the infrastructure reconstruction across the three badly hit provinces -- Aceh, West Sumatra, and North Sumatra -- would have a price tag of at least Rp 51.82 trillion.

Finance Minister Purbaya Yudhi Sadewa told reporters earlier that day the government had prepared the funds for the reconstruction. Some of the money will come from the budget austerity measures.