Key Takeaways
- Indonesia plans to narrow its budget deficit to a range of 2.48% to 2.53% of Gross Domestic Product (GDP) in 2026, a reduction from the revised 2.78% of GDP projected for 2025.
- The government and parliament have endorsed an ambitious economic growth target of 5.2% to 5.8% for 2026, underpinned by an expansive yet targeted fiscal policy.
- This 2026 budget, the first under President Prabowo Subianto's administration, focuses on strengthening national resilience through investments in food and energy self-sufficiency, education quality, national industrialization, and key social programs like the free meals initiative.
Indonesia's government is set to propose a budget deficit of 2.48% to 2.53% of GDP for 2026, demonstrating a strategic effort to balance economic expansion with fiscal prudence. This projection, presented by Finance Minister Sri Mulyani Indrawati, marks a decrease from the 2.78% of GDP deficit anticipated for 2025. The move signals the nation's commitment to sound fiscal management amidst global economic uncertainties.
The proposed budget aims to support an optimistic economic growth target of 5.2% to 5.8% in 2026. This growth is expected to be driven by an expansive fiscal policy that is simultaneously targeted and measurable, ensuring economic momentum while maintaining sustainability. State revenues are projected to reach between 11.71% and 12.31% of GDP, or approximately Rp3.094 trillion to Rp3.114 trillion (US$199 billion to US$201 billion). Concurrently, state expenditures are estimated at 14.19% to 14.83% of GDP, equivalent to Rp3.800 trillion to Rp3.820 trillion (US$241 billion to US$243 billion).
Under President Prabowo Subianto's leadership, the 2026 budget prioritizes several key areas designed to bolster national resilience and prosperity. These include achieving food and energy self-sufficiency, enhancing the quality of education, and accelerating national industrialization. Significant social programs, such as the flagship free meals program for an estimated 83 million students and pregnant women, are also central to the fiscal plan.
Other macroeconomic assumptions for 2026 include an inflation target of 1.5% to 3.5%, an exchange rate of Rp16,500 to Rp16,900 per US dollar, and crude oil prices averaging between US$60 and US$80 per barrel. The government also aims to reduce the poverty rate to 6.5% to 7.5% (with extreme poverty at 0% to 0.5%) and the open unemployment rate to 4.44% to 4.96%. While the budget reflects optimism, officials acknowledge potential challenges from global economic pressures and a relatively low tax ratio, emphasizing the need for coordinated fiscal and monetary policies.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.