Tangerang. Indonesia’s 5.45% economic growth in the first half of 2026 has yet to translate fully into improved public welfare because it has failed to generate a significant number of jobs, an economist said on Tuesday.

Indonesia’s main challenge is not simply to pursue higher economic growth but to ensure that growth -- and investment in particular -- creates more quality jobs, said Yose Rizal Damuri of the Center for Strategic and International Studies (CSIS).

Yose said economic growth remains an important measure of economic performance, but strong headline figures should be accompanied by tangible benefits for the public.

A key concern is the state of the labor market. Although Indonesia’s unemployment rate remains relatively low, most new jobs are being created in the informal sector, which accounts for around 80% of employment, while unemployment among university graduates is also on the rise.

“Unemployment is low, but most of the jobs being created are in the informal sector -- as much as 80%. At the same time, unemployment among university graduates continues to increase,” Yose said during a discussion at B-Universe Media Holdings in Tangerang, Banten.

Another concern, he said, is the declining ability of investment to generate employment. While investment has continued to increase in value, it has not been accompanied by a proportional rise in job creation.

In 2014, every Rp 1 trillion ($56 million) in investment could generate around 3,500 jobs, according to Yose. Today, the same amount of investment is estimated to create only around 1,200 jobs.

Yose said the decline remains significant even after taking inflation into account.

The trend indicates that Indonesia’s investment structure has become increasingly capital-intensive, moving away from labor-intensive activities. Yet labor-intensive industries remain essential to absorbing large numbers of workers given the structure of Indonesia’s workforce, he said.

“If growth exists only in the numbers but its impact cannot be seen, then that is not the kind of growth we are aiming for,” Yose concluded.

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