Economist says government spending in the first quarter boosted money supply

Josua Pardede, Chief Economist at Permata Bank, stated that the acceleration of government spending during the first quarter of this year contributed to the increase in the money supply in March 2026. “This shows that faster fiscal activity also contributes to increased liquidity in the economy, thereby strengthening transactions, consumption, and business activity,” said Josua Pardede when contacted by ANTARA from Jakarta, Saturday.

Bank Indonesia (BI) recorded that the economy’s liquidity or broad money supply (M2) in March 2026 grew 9.7 percent year-on-year (yoy), higher than in February 2026, which was recorded at 8.7 percent yoy.

One of the main drivers is net claims on the central government, which grew 39.2 percent yoy, an increase compared to the growth in February 2026, which was 25.6 percent yoy.

However, Josua assessed that this effect needs to be interpreted carefully because increased liquidity does not necessarily reflect quality economic growth if it is not followed by increased production, private investment, and improved productivity.

He gave the example that government spending, which tends to be consumptive, such as the provision of Eid bonuses (THR) during the Ramadan and Eid al-Fitr period, only provides a momentary boost to national economic growth and has no further impact in the following months.

“If spending is more consumptive or seasonal, its impact can quickly fade after the Eid period,” said Josua.

The increase in government spending activity in the first quarter is closely related to the increase in government consumption expenditure during that period, as reflected in the calculation of economic growth in the first quarter of 2026.

The Financial System Stability Committee (KSSK) recorded that the realization of state spending in the first quarter of 2026 reached IDR 815.0 trillion, or grew 31.4 percent yoy, consisting of central spending of IDR 610.3 trillion and transfers to regions of IDR 204.8 trillion.

Meanwhile, the Central Bureau of Statistics (BPS) reported an increase in government consumption expenditure in Gross Domestic Product (GDP) of 21.81 percent yoy during that period.