Economist: Accelerated Spending to Support Domestic Demand in Q3 2026
Jakarta (ANTARA) - Lead Economist at PT Bank Danamon Indonesia Tbk, Irman Faiz, suggests that the accelerated realisation of central government spending could support domestic demand in the short term, especially during the third quarter of 2026.
According to him, the increase in spending has so far been balanced by the growth in state revenue, ensuring that the widening of the state budget (APBN) deficit remains limited as of August.
“Fiscal policy is expected to provide the strongest growth impetus in the third quarter of 2026. The accelerated execution of central government spending should support domestic demand in the short term,” said Irman, based on a Bank Danamon Indonesia study in Jakarta on Monday.
In the study, Irman estimates that nominal government spending will remain high until the end of the year, although the year-on-year growth rate may become more moderate in the fourth quarter due to the relatively high spending realisation base from late 2025.
Ministry of Finance data shows that state spending realisation as of 31 August 2026 reached Rp2,295.7 trillion, or 59.7 per cent of the state budget ceiling, representing a 17.1 per cent growth compared to the same period the previous year.
Central government spending reached Rp1,791.5 trillion, growing 29 per cent annually, consisting of ministry/agency spending of Rp912.4 trillion and non-ministry/agency spending of Rp879.1 trillion.
At the same time, state revenue reached Rp2,055.6 trillion, or 65.2 per cent of the state budget target, growing 25.4 per cent annually.
With these developments, the state budget deficit was recorded at Rp240.1 trillion, or 0.93 per cent of Gross Domestic Product (GDP).
This deficit position has remained relatively stable compared to July 2026, which stood at Rp236 trillion or 0.91 per cent of GDP.
“The almost unchanged deficit reflects that revenues are capable of offsetting the accelerated spending, rather than a weakness in spending execution,” said Irman.
On the revenue side, tax revenue as of August reached Rp1,409 trillion, growing 24.1 pert cent annually. Meanwhile, non-tax state revenue (PNBP) reached Rp435.1 trillion, an increase of 41.7 per cent.
Irman believes the revenue growth rate may normalise towards the end of the year because part of the net increase in tax revenue is influenced by refund dynamics, while part of the increase in PNBP comes from non-recurring revenue.
The Directorate General of Taxes of the Ministry of Finance noted that tax refund realisation as of August 2026 was Rp191.82 trillion, down 37 per cent compared to Rp304.29 trillion during the same period the previous year.
Alongside the increasing need for spending for the remainder of the year, Bank Danamon projects the 2026 fiscal deficit will reach 2.89 per cent of GDP, slightly wider than the government’s projection of 2.85 per cent of GDP.
Irman expects the accelerated spending on priority programmes, as well as energy subsidies and compensation, to be factors increasing spending requirements until the end of the year. However, Danamon assesses that this widening deficit remains manageable in terms of financing and liquidity.
“The widening deficit is expected to remain manageable from a financing and liquidity perspective. Budget financing has reached Rp474 trillion, or 68.7 per cent of the annual plan, while the primary balance still records a surplus,” he said.
The state budget’s primary balance, which represents the difference between state revenue and state expenditure excluding interest payments, still recorded a surplus of Rp154 trillion as of August.
In its 2026 state budget projection, the government expects state revenue to reach Rp3,208.1 trillion and state expenditure to reach Rp3,942.4 trillion by the end of the year. With this projection, the deficit is expected to be Rp734.3 trillion, or 2.85 per cent of GDP.
Finance Minister Suahasil Nazara previously stated that the state budget performance through August remains on track, supported by a positive primary balance and a controlled deficit.