Indonesia’s economic growth performance in the first quarter of 2026 has generated discussion among economists following the release of sectoral data showing manufacturing industry growth of 5.04 percent year-on-year alongside a 0.99 percent contraction in the electricity, gas, and water supply sector. Some observers questioned whether these figures indicated an inconsistency in Indonesia’s economic statistics, given that manufacturing remains one of the largest consumers of electricity nationwide.
According to GREAT Institute Economic Researcher Adhamaski Pangeran, the contraction in the electricity, gas, and water sector does not necessarily contradict the positive performance of the manufacturing sector. Several seasonal and structural factors explain why both developments can occur simultaneously.
Seasonal Factors and Energy Consumption Patterns
One important factor is the seasonal decline in electricity consumption during the Eid al-Fitr period. Commercial activities and office operations typically slow down during the holiday season, reducing electricity demand. Similar patterns were observed during previous Eid periods, indicating that lower electricity consumption during this timeframe is a recurring phenomenon rather than an indication of weakening industrial activity.
Another contributing factor was the normalization of electricity consumption following the expiration of the government’s electricity tariff discount program implemented during the first quarter of 2025. The earlier policy boosted electricity demand, and its discontinuation naturally resulted in a statistical normalization effect in early 2026.
Impact of Gas Supply Constraints
External pressures also affected the energy sector during the period. Geopolitical turbulence in the Middle East disrupted gas distribution, while limited domestic natural gas supply and adjustments to industrial gas quotas affected several energy-intensive industries, including ceramics, glass, and cement. Nevertheless, the impact on overall manufacturing performance remained limited because not all manufacturing subsectors rely on natural gas to the same extent.
Differences in Economic Measurement
Adhamaski also emphasized the importance of understanding how the electricity sector is measured within Indonesia’s Gross Domestic Product (GDP) framework. The value added of the electricity, gas, and water sector is calculated based on producer margins, namely the difference between output and production costs of electricity providers such as PLN and Independent Power Producers (IPPs). Consequently, a decline in sectoral value added does not automatically imply that the physical volume of electricity supplied has fallen by the same magnitude. Rising production costs, energy prices, or subsidy burdens can affect sectoral value added even when electricity distribution remains relatively stable.
The Role of Captive Power in Manufacturing
Another important consideration is the growing role of captive power generation within Indonesia’s industrial sector. Nickel smelters, which have become one of the primary drivers of manufacturing growth, largely rely on self-generated electricity rather than power supplied by PLN or IPPs. As a result, manufacturing output growth is not entirely dependent on the performance indicators of the public electricity supply sector. This makes a direct or linear interpretation between electricity sector contraction and manufacturing growth inappropriate.
Conclusion
From GREAT Institute’s perspective, the first-quarter 2026 contraction in the electricity, gas, and water sector can be explained through a combination of seasonal consumption patterns, post-stimulus normalization, gas supply constraints, differences in GDP measurement methodology, and the increasing role of captive power in industrial production. Therefore, the positive growth recorded by Indonesia’s manufacturing sector remains consistent with broader economic dynamics and should not be viewed as contradictory to developments in the energy sector.
Sources:
• VIVA: GREAT Institute: Pertumbuhan Manufaktur dan Kontraksi Listrik Tidak Bertentangan
• ANTARA: Peneliti Nilai Kontraksi Listrik Tak Ganggu Manufaktur
• Media Indonesia: Kontraksi Sektor Listrik tak Bertentangan dengan Pertumbuhan Manufaktur
• JPNN: Peneliti GREAT Institute Menilai Kontraksi Sektor Listrik Dipengaruhi Faktor Musiman
• SINDOnews: Pertumbuhan Industri dan Kontraksi Listrik Dinilai Masih Rasional
