Airlangga Explains Why Budget Deficit Could Exceed 3 Percent
The Coordinating Minister for Economic Affairs Airlangga Hartarto presented three worst-case scenarios for the state budget deficit (APBN) to President Prabowo Subianto during a cabinet meeting at the State Palace in Jakarta, projecting the deficit could exceed the 3 percent limit due to geopolitical conflict and rising global oil prices.
According to his calculations, under the worst conditions the APBN deficit could range from 3.18 percent to 4.06 percent of Gross Domestic Product (GDP). “This means that with these various scenarios, maintaining a 3 percent deficit would be difficult unless we are willing to cut spending and reduce economic growth,” Airlangga stated on Friday, 13 March 2026.
His calculations were based on three possible scenarios regarding the duration of conflict in the Middle East, alongside assumptions about global crude oil price increases, rupiah depreciation, and economic growth projections.
In the first scenario, Indonesian crude oil prices (ICP) are valued at US$86 per barrel with the rupiah at 17,000 per US dollar (compared to the APBN assumption of 16,500 per dollar). With economic growth maintained at 5.3 percent and state securities yields rising to 6.8 percent, the deficit would reach 3.18 percent of GDP.
Airlangga outlined a moderate second scenario with oil prices at US$97 per barrel, the rupiah at 17,300 per dollar, economic growth at 5.2 percent, and state securities yields at 7.2 percent. This scenario projects an APBN deficit of 3.53 percent of GDP.
The third scenario represents the most pessimistic case, with oil prices reaching US$115 per barrel, the rupiah at 17,500 per dollar, economic growth at 5.2 percent, and state securities yields at 7.2 percent, resulting in a deficit of 4.06 percent of GDP.
Current legislation sets a maximum limit for the APBN deficit of 3 percent of GDP. However, based on Airlangga’s analysis, maintaining this threshold appears unfeasible. “These are several scenarios that may require limited discussion at the highest level,” Airlangga remarked.