Mining is the only sector the national accounts show contracting, and the reason is a policy choice about value

Statistics Indonesia published the second quarter national accounts on 5 August 2026. The economy grew 5.29 percent year on year, 3.73 percent against the preceding quarter, and 5.45 percent cumulatively across the first half. Gross domestic product reached Rp6,552.1 trillion at current prices and Rp3,576.2 trillion at constant prices. Of the seventeen business sectors the agency tracks, sixteen recorded positive growth. One did not.

Moh Edy Mahmud, Deputy for Balance of Accounts and Statistical Analysis at Statistics Indonesia, stated the position without qualification.

In the second quarter of 2026, measured year on year, every sector grew positively with the exception of mining.

Mining and quarrying contracted 1.64 percent. It remains one of the five largest sectors in the economy, holding 8.87 percent of second quarter output, and together with manufacturing, agriculture, trade and construction it accounts for 63.73 percent of gross domestic product. A sector of that weight registering the only negative reading in the national accounts is worth reading carefully, because the composition of the number says something quite different from the headline.

What sits inside the mining figure

The agency disaggregated the result into three subsectors. Metal ore mining fell 9.42 percent, driven by lower output of bauxite, tin and nickel ore. Oil, gas and geothermal extraction contracted 2.15 percent, attributed to the natural productivity decline of existing wells and a thin pipeline of new reserve discoveries. Coal and lignite mining contracted 1.41 percent.

The coal reading carries the clearest policy signature. Statistics Indonesia linked it directly to the production quota arrangement administered through the Work Plan and Budget framework, the RKAB, which the government has used to hold supply in balance and support prices in the international coal market. That is a deliberate instrument operating as designed. A quota that restrains volume in order to protect price is not a symptom of weakness in the sector. It is a decision to trade tonnage for unit value, and the national accounts, which measure physical output volume at constant prices, will record the tonnage side of that trade before they record the revenue side.

The metal ore figure carries a second and largely geological explanation. Underground operations at Grasberg Block Cave in Central Papua have not returned to full capacity following the landslide incident of September 2025. That single facility is material enough at national scale to move a subsector line in the accounts. Its recovery is already underway, with the associated smelter at Manyar in Gresik scheduled to resume concentrate processing during the second half of the year.

The trajectory is the part most easily missed. In the first quarter of 2026 the mining and quarrying sector contracted 2.14 percent, with metal ore mining down 12.22 percent. Three months later those readings are 1.64 percent and 9.42 percent. The contraction is narrowing on both measures. The sector is recovering, and it is recovering from a base shaped partly by a natural event and partly by supply discipline the state chose to apply.

Where the value went instead

The same release shows what happened to the value that did not appear as extracted tonnage. Manufacturing was the largest single source of national growth, contributing 0.90 percentage points and expanding 4.52 percent against an 18.50 percent share of output. Trade contributed 0.83 percentage points on growth of 6.39 percent, construction 0.62 percentage points on 6.68 percent, and information and communication 0.48 percentage points. Electricity and gas supply grew fastest of all at 10.81 percent, followed by accommodation and food services at 10.60 percent.

Within manufacturing, the basic metals and electronics grouping recorded growth of 8.04 percent, and the basic metals purchasing managers index stood at 53.59. Those are the industries that take domestic ore and turn it into cathode, ingot, alumina and battery precursor. Ore volume down, processed metal output up. That is the downstream policy of the last decade producing exactly the pattern it was designed to produce.

On the expenditure side, household consumption contributed 2.67 percentage points on growth of 5.06 percent and a 53.32 percent share, gross fixed capital formation added 2.06 percentage points, and government consumption 1.07 percentage points. Net exports subtracted 0.78 percentage points, consistent with an economy importing capital goods to build processing capacity.

Why volume alone understates the sector

The national accounts are an honest instrument, and they measure what they were built to measure. At constant prices they track the physical volume of production. They do not, by construction, capture the value created when a tonne of ore becomes a tonne of refined metal inside a different sector's account, and they do not capture the condition of the land, water and biological systems that the extraction draws on and later returns.

A sector measured only by how much it removes from the ground will always look weakest in the quarter it becomes most disciplined.

This is the practical case for a fuller valuation ledger alongside the volume series. Indonesia already has the regulatory instruments for it. Permen LH No. 7 Tahun 2014 sets out the methodology for pricing ecological damage, environmental economic loss and recovery cost. The reclamation and post mining guarantee framework administered through the Ministry of Energy and Mineral Resources places a monetary figure on the obligation attached to disturbed land. AMDAL documentation establishes the environmental baseline against which change is assessed. Satellite and drone based remote sensing now makes land cover, disturbance extent and reclamation progress measurable at hectare precision and on a repeating schedule rather than as a single point in time.

Read together, those instruments describe an asset position, not just a compliance file. Reclaimed hectares, water quality restored to baseline, carbon held in replanted cover, fisheries and biodiversity indicators returning to reference condition: each is a quantity that can be priced with an accepted methodology and reported alongside production tonnage.

Sirkularium's view

For government, the second quarter release is an argument for widening the measurement frame rather than for concern about the sector. Mining's contribution to national welfare in a quarter of quota discipline is not fully visible in a volume series, and the growth that appeared in basic metals and in electricity supply is part of the same value chain. A supplementary account that reports the sector's environmental capital position, using the valuation methodology already codified in Indonesian regulation, would let policymakers see the whole ledger when quota, royalty and permit decisions are being weighed.

For operators, the case is more immediate. Companies preparing quota applications, royalty positions and reclamation submissions are increasingly asked to demonstrate value rather than assert it. An independently verified economic valuation, combining GIS and remote sensing evidence with ground measurement and the standard methodology under Permen LH No. 7 Tahun 2014, is considerably more useful when it is maintained as continuous practice than when it is assembled under pressure after a dispute has already started.

Sirkularium's read for public institutions is that the second quarter figures describe a sector in managed transition rather than in decline. Two things are worth watching over the coming quarter: whether the narrowing in metal ore contraction continues as Grasberg and the Manyar smelter return to capacity, and whether the value created downstream keeps outpacing the volume forgone upstream. If both hold, the second half will show that the trade of tonnage for value was priced correctly.