Economist: Fiscal Optimism Must Be Accompanied by Real Consolidation
Our fiscal buffers in the second quarter are still sufficient to cushion short-term shocks, but not thick enough to withstand prolonged shocks.
Jakarta (ANTARA) - M Rizal Taufikurahman, Head of the Macroeconomic and Finance Centre at the Institute for Development of Economics and Finance (INDEF), believes that the government’s optimism regarding fiscal resilience must be accompanied by real consolidation actions.
This is aimed at ensuring that the State Revenue and Expenditure Budget (APBN) is not only stable on the surface but also genuinely strong when facing prolonged global pressures.
“Our fiscal buffers in the second quarter are still sufficient to cushion short-term shocks, but not thick enough to withstand prolonged shocks,” Rizal said when contacted by ANTARA in Jakarta on Wednesday.
According to him, the current pressures on the fiscal situation stem from a combination of rising energy prices, rupiah depreciation, and potential slowdown in tax revenues due to weakening economic activity.
These conditions are making government spending space increasingly rigid, particularly as the needs for subsidies and energy compensation tend to rise.
In such a situation, Rizal said, the APBN can still function as a shock absorber, but at a relatively high cost and with increasingly narrow room for manoeuvre if global pressures persist.
Nevertheless, he views the government’s optimism about the fiscal condition as an effort to maintain market confidence.
However, Rizal stated that such steps need to be accompanied by strategies to manage fiscal space so that it remains loose.
“Fundamentally, our fiscal challenges lie in the quality of its resilience, not merely the deficit level. As long as spending structure is still dominated by inflexible components and the revenue base is not yet strong enough, every external shock will quickly erode fiscal space,” Rizal explained.
Therefore, he believes optimism remains important but must be followed by more concrete consolidation steps, particularly in refining subsidies to be more targeted and strengthening state revenues structurally.
These steps are deemed essential to ensure fiscal resilience is not only maintained in the short term but also truly solid when tested by future global pressures.
Previously, Finance Minister Purbaya Yudhi Sadewa, during his visit to the United States last week, stated that Indonesia still has a solid fiscal condition and adequate budget buffers amid current global uncertainties.
In front of the IMF and World Bank, Purbaya conveyed optimism that Indonesia’s economy is capable of achieving 5.4-6 per cent growth in 2026 despite ongoing global tensions.