Indonesia: Navigating tighter fiscal space

研报英文原文证据摘录

Indonesia: Navigating tighter fiscal space

Charnon Boonnuch (65) 6807 5086 Asia Pacific Economic Research J P M O R G A Ncharnon.boonnuch@jpmorgan.com

JPMorgan Chase Bank, N.A., Singapore Branch 17 July 2026

Jin Tik Ngai (65) 6807 5556

jintik.ngai@jpmorgan.com

JPMorgan Chase Bank, N.A., Singapore Branch

Indonesia: Navigating tighter ... driven by fuel subsidy spending

fiscal space The budget revision reveals that the government prioritizes limiting the impact of the energy price shock on inflation.

Historical precedents, such as the 2022 episode, also highlight

• The fiscal deficit target for 2026 was raised to 2.85% social stability concerns associated with fuel price hikes. The of GDP, owing to higher fuel subsidy spending

budgeted subsidy spending was revised substantially higher

• This is still within the statutory limit but points to nar- by IDR139tn (0.5% of GDP) to IDR451tn (1.8% of GDP) in

rowing fiscal space amid economic uncertainties 2026 (Table 1-2).

• The planned fiscal consolidation to 1.8-2.4% of GDP in

2027 via spending cuts is encouraging At the same time, the government has announced spending

cuts in the free meal program (MBG) of IDR67tn (0.3% of

• This may be challenging to implement, however, given GDP), to IDR268tn (1.0% of GDP), as part of the efficiency official growth targets and rising interest payments

push, which would help improve the spending quality. This,

Widening fiscal deficit in 2026 in effect, helps to provide a partial offset to fuel subsidies.

The Ministry of Finance (MOF) last week reported that the Overall, state spending was revised up to IDR3,942tn (15.3%

budget deficit totalled IDR197tn in 1H26, tracking closely of GDP) from IDR3,843tn (14.9% of GDP). Despite the

with the 2025 trend (Figure 1).