Indonesia Jan-Aug Budget Deficit at 1.35% of GDP, Ministry Data Shows

Macroeconomics in Indonesia

Indonesia has recorded a budget deficit of 321.6 trillion rupiah ($19.38 billion) from January to August, which is equivalent to 1.35% of the country’s gross domestic product, according to data from the finance ministry.

Budget and Spending

The total revenue for the period reached 1,639 trillion rupiah, which is a 7.8% decrease from the same period in 2024. On the other hand, total spending stood at 1,960 trillion rupiah, a 1.5% increase from the previous year. The new finance minister, Purbaya Yudhi Sadewa, has emphasized the need to speed up government spending to reach the spending target by the end of the year.

Economic Growth

Higher government spending is necessary to boost economic growth, with the target set at 5.2% for the year. Indonesia’s economy has maintained a steady growth rate of around 5% in recent years, with a second-quarter increase of 5.12%, the highest since 2023. However, economists have expressed concerns about the outlook for the rest of the year and beyond, citing weakening global trade and softening domestic consumption.

Stimulus Package

To address these concerns, the government has launched an economic stimulus package worth nearly $1 billion to bolster growth in the fourth quarter. The! package includes rice handouts, tax breaks, and temporary jobs in infrastructure projects. Additionally, Purbaya has moved more than $12 billion of state money from the central bank to commercial banks to spur credit growth.

Fiscal Discipline

Despite these efforts, concerns remain about Indonesia’s fiscal discipline, particularly among investors. The central bank has delivered another surprise interest rate cut to boost economic growth, but this has raised concerns about the country’s fiscal responsibility. The rupiah, one of emerging Asia’s worst-performing currencies, has dropped around 3% against the US dollar due to concerns about Indonesia’s domestic finances and the independence of the central bank.

Conclusion

In conclusion, Indonesia’s macroeconomic situation is complex, with a budget deficit, slowed revenue growth, and concerns about fiscal discipline. While the government has taken steps to boost economic growth, including launching a stimulus package and increasing government spending, more needs to be done to address the underlying challenges. As the country looks to the future, it will be essential to strike a balance between promoting economic growth and maintaining fiscal responsibility.