Jakarta. DBS Bank has lowered its forecast for Indonesia’s economic growth in 2026 to 5.1% from 5.3%, citing risks of slower business activity and limited fiscal support in the coming quarters despite a strong start to the year.

The revised outlook was presented in a report titled “Indonesia Growth: Firm Start, Speed Bump Ahead” released on Thursday.

Radhika Rao, senior economist for Indonesia at DBS, said the country’s economy expanded 5.61% year-on-year in the first quarter of 2026, broadly in line with the bank’s earlier expectations.

“It marked the fastest quarterly growth since the third quarter of 2022,” Radhika said.

Despite the solid performance, DBS believes the first quarter likely represented the peak of economic growth this year, with momentum expected to soften in subsequent quarters.

The bank warned that real economic activity could face increasing pressure from elevated energy prices and tighter constraints on public finances.

“The strong start to 2026 reflects positive underlying economic conditions, but external risks require us to adjust our full-year growth outlook,” Radhika said.

“Taking these risks into account, we have slightly revised down our 2026 growth forecast to 5.1% from 5.3%.”

According to DBS, Indonesia’s economic momentum at the beginning of the year was supported by stronger consumption during religious holiday periods, fiscal stimulus measures including holiday allowances, favorable base effects, robust government spending, and improved market sentiment.

However, the bank noted that activity began slowing toward the end of the quarter around March, amid stock market volatility and supply-chain disruptions faced by companies due to escalating tensions between the United States and Iran.

Consumer spending rose 7% year-on-year during the quarter, driven by stronger household and government expenditure. Investment growth also remained solid at around 6% year-on-year.

Net exports, however, became the main drag on growth, subtracting about 1.2 percentage points from overall economic expansion during the period.

DBS said Indonesia still retains relatively resilient economic fundamentals, but the outlook for the rest of the year will depend heavily on global energy prices, geopolitical developments, and the government’s ability to maintain fiscal stability while supporting domestic demand.