APAC Economic Comment: ASEAN Weekly: Indonesia fiscal updates, Philippines and Thailand CPI

Research evidence excerpt

APAC Economic Comment: ASEAN Weekly: Indonesia fiscal updates, Philippines and Thailand CPI

Global Research

10 July 2026ab

APAC Economic Comment Economics

AsiaASEAN Weekly: Indonesia fiscal updates,

Philippines and Thailand CPI Claire Long

Economist

claire.long@ubs.com

+65 6495 7426

Indonesia: Government projects a wider fiscal deficit at 2.85% of GDP Grace Lim

In 1H26, Indonesia recorded a budget deficit of Rp196.5tn (0.76% of GDP), marginally Economist

better than the 0.86% of GDP deficit recorded in 1H25. Total revenue increased by 21% grace-k.lim@ubs.com

+65-6495 5965

y/y to Rp1,459tn (5.6% of GDP), while expenditure rose by 18% y/y to Rp1,656tn (6.4%

of GDP).

Despite the relatively contained deficit in 1H26, the government has revised its full-year Figure 1: Indonesia better non-tax

2026 fiscal deficit target to 2.85% of GDP, up from the previous estimate of 2.68% and revenue and more spending in H1

slightly above the 2025 deficit of 2.81%. The upward revision primarily reflects an

additional Rp132tn (0.51% of GDP) in subsidy spending. To offset part of this increase, and

the government plans to reduce allocations to the free nutritious meals program (MBG). enue

The revised budget currently allocates Rp268tn to the MBG program (down Rp67tn rev

from the original budget). However, the government is considering a further Rp40tn -tax

reduction, which would lower the allocation to Rp228tn. Looking ahead to 2027, the non

MBG budget could be cut even further to Rp174tn (0.67% of GDP), as per government tter

suggestions. While the additional Rp132tn in subsidy spending may ultimately prove a be

insufficient if oil prices tick up again (see our sensitivity analysis of subsidies to oil prices nesi

here), we see limited risk of the fiscal deficit exceeding 3% of GDP.