GDP growth accelerated. GDP growth accelerated to 5.4% in 4Q from 5% in 3Q, above expectations (Mansek: 5.2%; Consensus: 5.1%), but still below MOF guidance of 5.45%. Domestic demand contribution rose sharply to 5.2 percentage points (pp) from 4.6pp while net exports weakened. (Exhibits 1 and 2). This implies full-year real GDP growth of 5.1% in 2025, up from 5.0% in 2024. On a seasonally adjusted basis, GDP growth increased to 1.5% q-o-q sa from 1% in 3Q. NGDP growth rose to 8.3% y-o-y from 7.5% in 3Q, implying a 7.6% growth in 2025 (2024: 5.9%).

Improved household consumption. Private consumption growth rose to 5.1% y-o-y from 4.9% in 3Q, above our 5.0% forecast. The better-than-expected outturn was driven by stronger household consumption, which increased to 5.1% from 4.9% in 3Q, supported by higher spending on F&B, apparel, footwear, equipment, and healthcare (Appendix). Additionally, consumption by non-profit institutions rose sharply to 5.9% y-o-y from 3.4% in 3Q, supported by increased disaster-related assistance in Sumatra (Exhibit 3).

Higher investment, slower government consumption. As expected, investment growth increased to 6.1% y-o-y from 5% in 3Q, driven by machinery and equipment, which rose to 22.2% y-o-y from 17%, reflecting higher government capex (Exhibit 4). Building investment increased less sharply to 3.7% y-o-y from 3%, in line with higher cement consumption, likely for government projects such as school programs and village cooperatives. However, government consumption eased to 4.6% from 5.5% in 3Q.

Limited impact from landslide disasters. By main islands, 4Q GDP growth rose to 5.8% from 5.2% in Java and to 6.8% y-o-y from 5.8% in Sulawesi. By contrast, Sumatra s growth moderated to 4.5% y-o-y from 4.9%, reflecting disruptions from Northern Sumatera widespread landslide. By sector, output from mining sectors improved but remained contracting, while trade and transport picked up on seasonal demand. Manufacturing growth moderated slightly to 5.4% y-o-y, dragged by rubber, tobacco, and metals, while machinery-equipment rebounded sharply (Appendix).

Slightly higher formal worker share. Statistics Agency now releases employment data more frequently in Nov, compared with the previous only for Feb and Aug. The unemployment rate fell to 4.7% in Nov from 4.9% in Aug, supported by F&B, manufacturing, and wholesale trade, which together added 745k jobs since Aug-25. Formal workers share also rose slightly to 42.3% from 42.2% in Aug and 40.6% in Feb (Exhibit 5).

We expect higher GDP growth this year. We expect GDP growth to edge up to 5.2% in 2026 from 5.1% in 2025, supported by a more expansionary fiscal stance. The capex cycle should gradually improve alongside easier policies and lower regulatory uncertainty. However, net exports should moderate as trade surplus shrinks due to U.S. tariffs and disruptions at Freeport Grasberg mining. Downside risks stem from prolonged muted private investment and job creation, and weaker-than-expected government spending.

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