Financial Market Pressure Has Not Translated into Real Sector Weakness, SBM ITB Economist Says

Press Release

Bandung, August 20, 2026

The performance of the Indonesian economy in the second quarter of 2026 should be read by distinguishing financial market dynamics from real economic activity. This was conveyed by Ir. Dzikri Firmansyah Hakam, S.T., Pg.Dip., M.Sc., Ph.D., Lecturer at the School of Business and Management, Institut Teknologi Bandung (SBM ITB) and Executive Director of the Institute for Energy, Economics and Finance (IEEF), in an exposition published by the official ITB portal (itb.ac.id) on Thursday, August 20, 2026, in response to national growth of 5.29% year-on-year (YoY) recorded amid pressure on domestic financial markets.

Hakam explained that market sentiment can shift within days, whereas consumption, credit, investment, production, and employment adjust far more slowly. “Pressure in financial markets has not yet been fully translated into a weakening of real economic activity,” he said. “At the initial stage, such pressure mainly affects asset prices, portfolio allocation, foreign portfolio flows, risk premium, and perceptions of Indonesia’s investment attractiveness. The impact on the real sector will be felt only if it persists into higher cost of capital, slower investment, and diminished job creation.”

One manifestation is Indonesia’s investability: in June 2026, MSCI flagged concerns over shareholder transparency and coordinated trading, and opened the possibility of consulting on a reclassification from Emerging Market to Frontier Market absent improvement by November 2026. Capital flows, however, have not tracked equity market pressure — Bank Indonesia recorded a net inflow of foreign portfolio investment of US$8.5 billion in the quarter, mainly into Government Securities and Bank Indonesia Rupiah Securities. “This is more accurately understood as a shift in portfolio preference and allocation rather than a wholesale exit of foreign capital,” he explained.

Gross Fixed Capital Formation grew 6.87%, though Hakam cautioned this does not automatically signal stronger private investor confidence, as growth was driven largely by construction tied to National Priority Work Programs. Externally, May 2026 exports of US$23.20 billion against imports of US$24.81 billion produced a deficit, yet January–May still posted a US$4.03 billion surplus, with rising imports reflecting demand for raw materials, capital goods, and energy. “The external sector has not been the primary source of growth resilience, but its pressure has also not been large enough to offset domestic demand,” he concluded.

Source: itb.ac.id, August 20, 2026 — https://itb.ac.id/berita/ekonom-itb-soroti-ketahanan-ekonomi-indonesia-pada-kuartal-ii-2026/63725