Indonesia's manufacturing sector closed 2025 with promising expansive performance driven by a surge in domestic demand. Bank Indonesia is predicted to hold its benchmark interest rate to maintain the stability of the Rupiah, which is currently weakening against the US Dollar. Meanwhile, the government is moving quickly to prepare thousands of hectares of ex-HGU land for the relocation of permanent housing for disaster victims in the Sumatra region.
The national processing industry sector is showing its teeth again by recording expansive performance in the fourth quarter of 2025. The Bank Indonesia Manufacturing Index (PMI-BI) climbed to the level of 51.86 percent, driven by a significant increase in production volume and total orders from the domestic market. The paper industry, non-metal mineral products, as well as food and beverage subsectors became the main growth engines recording the highest growth. This positive trend is projected to continue until 2026, especially in sectors closely related to the daily needs of the community.
Despite soaring demand, industry players still face serious challenges regarding raw material supplies which hinder the optimization of production capacity. Permata Bank Economist, Josua Pardede, warned that supply chain smoothness and operational cost control are vital keys so that this growth momentum does not stall. Business players are expected to remain vigilant against global dynamics, yet optimism for manufacturing performance strengthening in the next twelve months remains maintained. This accelerating real sector activity demands robust monetary stability support amidst exchange rate fluctuations overshadowing the financial market.
Bank Indonesia (BI) is strongly predicted to maintain the benchmark interest rate at 4.75 percent at the Board of Governors Meeting in January 2026 to dampen exchange rate volatility. The Rupiah exchange rate was observed weakening to reach Rp16,922 per US dollar, a condition forcing monetary authorities to prioritize currency stability over aggressive easing. BCA Economist, David Sumual, assesses this step as crucial to maintaining the attractiveness of Rupiah assets in the eyes of global investors, while fiscal policy is expected to remain conservative and prudent.
Pressure on the Rupiah is allegedly caused by an imbalance between high demand for dollars for imports and debt payments versus dollar supplies that are held up in the domestic market. Bank Danamon Economist, Hosianna Evalita Situmorang, added that interest rate cuts will likely only happen if the Fed provides clear signals of easing. BI's main focus currently is maintaining macroeconomic balance through measured market intervention. Beyond macroeconomic issues, the government is also working hard to handle the social impact of natural disasters hitting the Sumatra region with concrete agrarian solutions.
The Ministry of Agrarian Affairs and Spatial Planning/National Land Agency (ATR/BPN) has completed the identification of thousands of hectares of Cultivation Right (HGU) land to be used as permanent housing (Huntap) locations for disaster victims. Minister of ATR/Head of BPN, Nusron Wahid, ensured land availability in Aceh, North Sumatra, and West Sumatra originating from abandoned land or HGUs that have expired. This strategic step includes providing 81,551 hectares of potential land in Aceh and 88.445 hectares in West Sumatra to guarantee legal certainty for new residences for affected residents.
The government prioritizes land located within a 1-kilometer radius of disaster locations so that the relocation process runs effectively and safely for the community. This land readiness is expected to accelerate the post-disaster rehabilitation and reconstruction process without being hindered by legality disputes in the future. The synergy between rapid land provision and physical housing construction is proof of the state's presence in restoring the socio-economic life of citizens.
Expansive economic policies and responsive disaster handling provide positive signals for the investment climate, but business players must still anticipate currency volatility risks that can erode profit margins. Investors are advised to take a defensive position by observing resilient consumer sectors and monitoring central bank interest rate policies periodically.
Indonesia's economic resilience in 2026 will depend heavily on the ability to maintain domestic purchasing power while managing exchange rate stability with discipline. The government and relevant authorities must immediately execute disaster relocation programs and ensure industrial supply smoothness so that the economic wheels continue to spin fast without structural obstacles.
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