Indonesia's 2025 Budget Deficit Expands to 2.92% of GDP

Widening Deficit Raises Concerns

Indonesia's budget deficit for fiscal year 2025 has widened to 2.92% of Gross Domestic Product (GDP) ¹

, surpassing the initial target of 2.78%. This expansion is primarily attributed to lower-than-expected tax revenue, with actual receipts reaching only 87.6% of the Rp 2,189.3 trillion target, amounting to Rp 1,917.6 trillion ²

Source 2

https://nasional.kontan.co.id/news/shortfall-pajak-2025-melebar-target-2026-sulit-dicapai

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Factors Contributing to the Shortfall

The shortfall in tax revenue is identified as the main factor contributing to the widening deficit. According to Ariawan Rahmat, Director of Indonesia Economic Fiscal (IEF) Research Institute, despite non-tax revenue exceeding its target by 104%, it was insufficient to offset the weakness in tax collection ²

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Economic Implications

The widening deficit has raised concerns among economists regarding its potential impact on investor sentiment, particularly in the government bond market ³

. David Sumual, Chief Economist at BCA, noted that while the deficit remains below the 3% threshold mandated by law, it could still influence investor perceptions ³

Source 3

https://nasional.kontan.co.id/news/ekonom-bca-defisit-apbn-2025-ke-292-pdb-bisa-pengaruhi-sentimen-investor-obligasi

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Positive Developments

On a positive note, Indonesia's foreign exchange reserves saw a significant increase in late 2025, driven by government global bond issuance, strong export-import activities, and foreign investment in domestic financial markets ⁵

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Challenges Ahead

The tax revenue shortfall not only widened the deficit but also reduced the government's fiscal space. With the 2026 tax revenue target set at Rp 2,357 trillion, experts consider this ambitious given the 2025 performance ⁶

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