Pefindo Warns of Potential Deficit in 2026 Budget

Risks of Expansive Fiscal Policy

The Indonesian government faces potential risks as it plans to increase fiscal spending in the 2026 State Budget (APBN). Chief Economist of PT Pemeringkat Efek Indonesia (Pefindo), Suhindarto, highlighted that a more expansive fiscal policy could lead to a wider budget deficit if not managed effectively. The increased spending is designed to provide stronger fiscal support for economic growth, but it poses significant challenges to maintaining national economic stability.

Balancing Growth and Fiscal Sustainability

The government's challenge lies in balancing the need to support economic growth through increased spending while ensuring fiscal sustainability. Pefindo's warning underscores the importance of careful planning and management of the 2026 budget to mitigate potential risks. The APBN 2026 needs to be structured in a way that maximizes its positive impact on the economy while minimizing the risk of a significant budget deficit.

Implications for Economic Stability

A more expansive fiscal policy can have both positive and negative effects on the economy. On the positive side, it can stimulate economic growth by increasing government expenditure on infrastructure, social programs, and other development projects. However, if not properly managed, it can lead to increased government debt and a larger budget deficit, potentially destabilizing the economy. Therefore, it is crucial for the government to implement effective fiscal management strategies to ensure that the benefits of increased spending are realized while maintaining economic stability.