Indonesia’s Economy Grows 5.3%, but SMEs Face Rising Costs and Weak Purchasing Power

Indonesia’s economy is still growing at about 5%, but many small and medium-sized businesses are not experiencing that growth as stronger profits. The Mandiri Business Survey 2026 found that rising raw-material costs and cautious consumer spending are squeezing SMEs.

The Mandiri Institute surveyed 1,269 SME owners or managers across 37 provinces in June and July 2026. Business turnover continued to increase, but the pace slowed, with most businesses reporting growth of less than 5%. The result points to ongoing commercial activity without a strong acceleration.

The pressure comes even as Indonesia’s economy expanded 5.29% year-on-year in the second quarter. Growth reached 5.45% in the first half of 2026, and Bank Mandiri expects the full-year figure to exceed 5.34%.

Dian Ayu Yustina, head of Bank Mandiri’s Macroeconomic and Financial Market Research Department, said consumer spending remained resilient. The Mandiri Spending Index recorded growth of 6.4% in the first quarter, 6.1% in the second, and about 6% in the third quarter through Aug. 23. “So in the third quarter of 2026, we still see consumer spending remaining resilient. Its growth is still relatively stable,” Dian said at the Mandiri Macro & Market Brief Q2-2026 Indonesia Economic Outlook.

That resilience is uneven. Consumers are becoming more selective and directing more of their spending toward essential needs. For SMEs, this limits their ability to pass higher input costs on to customers. The survey found that 22.8% of SMEs suffered lower margins when raw-material prices rose while purchasing power remained weak, roughly three times the 6% to 8% level recorded among other business profiles. Trade was the main pressure point, accounting for 53% of the affected SMEs, while 67% of their burden came from raw materials, including plastic.

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So in the third quarter of 2026, we still see consumer spending remaining resilient. Its growth is still relatively stable.