Economist: Indonesia's economic fundamentals still underpin market confidence

Permata Bank Chief Economist Josua Pardede believes the relatively strong fundamentals of the national economy continue to underpin market confidence. “The market sees that domestic fundamentals are still quite strong,” Josua said when contacted by ANTARA in Jakarta on Friday. According to Josua, this perception is influenced by economic growth in the first quarter of 2026 reaching 5.61 percent and inflation in May 2026 being controlled at 3.08 percent. On the fiscal side, budget financing realisation up to 31 May 2026 has reached Rp379.4 trillion, or 55.1 percent of the State Budget (APBN) target. Meanwhile, debt financing reached Rp386.0 trillion, or 46.4 percent of the Rp832.2 trillion target. “This means the government is not in a condition of short-term financing difficulty, but the challenge is to ensure the remaining financing is not obtained at too high a cost,” Josua said. He assessed that the government needs to ensure the financing strategy not only pursues fund fulfilment but also maintains cost, tenor and investor confidence. From the capital flow side, market signals indicate improvement. However, most foreign funds are still flowing into short-term instruments such as Bank Indonesia Rupiah Securities (SRBI), while interest in medium- and long-term Government Securities (SBN) still needs to be strengthened. Under these conditions, the BI Rate increase to 5.75 percent is considered helpful in maintaining the attractiveness of rupiah assets and curbing pressure on the exchange rate. Even so, Josua said, the government still needs to strengthen investor interest in SBN through flexible issuance strategies, consistent policy communication and strengthening the domestic buyer base. The government is also considered to need to maintain fiscal discipline through deficit control, filtering priority spending, and postponing non-urgent expenditure. Josua believes the policy direction in the 2027 KEM-PPKF, which targets a deficit of 1.80 percent–2.40 percent of GDP and a debt ratio of around 40.31 percent–40.64 percent of GDP, is a positive signal for the market if it can be implemented consistently. In addition, domestic market deepening needs to be continuously strengthened by enlarging the role of pension funds, insurance, banking, mutual funds, retail investors, and sharia instruments. A broader investor base will make the SBN market more stable and less dependent on foreign capital flows. “Therefore, the government needs to enlarge the role of pension funds, insurance, banking, mutual funds, retail investors, and sharia instruments so that the SBN market is deeper, more stable, and not too easily shaken by external sentiment,” he said.