Indonesia's 2026 Budget Plan: Expansionary Fiscal Policy Amid Global Uncertainty

Economic Context and Budget Structure

Indonesia's 2026 State Budget (APBN) has been designed with an expansionary fiscal stance, maintaining a deficit target of 2.68% of GDP ¹

. This budget structure reflects an optimistic economic growth outlook despite global uncertainties. The fiscal policy is designed to be stimulatory while maintaining measured control, focusing on economic growth stimulation and social protection measures.

Key Challenges and Considerations

Economists from leading financial institutions highlight that the success of the 2026 budget will not depend on the size of the budget, but rather on the effectiveness and quality of spending ¹

. With the deficit approaching the 3% GDP threshold, prudent fiscal management becomes increasingly critical. This situation demands strengthened fiscal discipline and improved spending quality to maintain investor confidence and ensure the budget effectively stimulates economic growth.

Role of Central Government Spending

The budget structure for 2026 indicates that central government spending will be the primary driver of economic growth ²

. This approach implies that the quality of governance and the speed of program execution will be crucial factors. Effective implementation will be necessary to ensure that fiscal stimulus reaches the real sector rather than being absorbed by administrative expenses.

Implications for Economic Growth

The expansionary fiscal policy through increased central government spending is expected to provide significant impetus to economic growth. However, the challenge lies in maintaining the balance between growth stimulation and fiscal sustainability. The government's ability to manage this balance will be closely watched by investors and could impact overall economic stability.