Indonesia’s economy grew 5.45% in the first half of 2026, but the expansion has yet to translate into significant job creation and improved economic welfare, economists have warned.
Yose Rizal Damuri, a researcher at the Center for Strategic and International Studies (CSIS), said Indonesia’s priority should not be limited to achieving higher economic growth but should focus on ensuring that investment and expansion generate more quality employment.
While the unemployment rate remains relatively low, around 80% of new employment is being generated in the informal sector, according to Damuri. At the same time, unemployment among university graduates is rising, highlighting a growing mismatch between economic growth and the availability of quality jobs.
Another concern is the declining capacity of investment to generate employment. Damuri said that in 2014, every Rp1 trillion of investment could generate around 3,500 jobs. Today, the same level of investment generates only about 1,200 jobs, even after accounting for inflation.
The trend suggests that Indonesia’s investment structure is becoming increasingly capital-intensive, reducing the employment impact of economic expansion. Damuri said labour-intensive industries remain important for Indonesia because of the size and structure of its workforce.
“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,” Damuri said during a discussion in Tangerang, Banten.
The concerns come as Indonesia targets economic growth of 6% in 2027. Hendri Saparini, an economist at the Center of Reform on Economics (CORE) Indonesia, said the target could prove difficult to achieve amid global uncertainty and unresolved domestic challenges.
Saparini said the government needs to identify clear sources of growth, particularly because about 75% of Indonesia’s economy is driven by domestic activity.
She also called for government spending to generate stronger economic multipliers, arguing that major public programmes should be designed to create economic activity, jobs and opportunities for businesses.
The economists also highlighted the need for more effective allocation of the state budget. Damuri said government spending could help stimulate growth during challenging global conditions, but its impact would depend on how effectively funds are allocated.
Saparini pointed to the Free Nutritious Meals programme as one area where implementation could be strengthened. The programme had absorbed around Rp100 trillion in the first half of 2026, and she said spending of this scale should generate wider economic activity, including through new businesses and agricultural development.
Damuri, meanwhile, questioned whether the programme should be implemented universally and argued that government resources could be more effectively targeted towards people most in need.
The broader debate highlights a key challenge for Indonesia: ensuring that economic growth is accompanied by productive employment, stronger workforce opportunities and tangible improvements in living standards.
For employers and policymakers, the shift towards more capital-intensive investment also raises questions about how Indonesia can expand quality employment while developing the skills needed to support a changing economy.