Economist Says Investors See Indonesia's Economic Resilience as Vulnerable, Budget Deficit Under Scrutiny

JAKARTA, KOMPAS.com - The Director of Economic Digital at the Center of Economic and Law Studies (Celios), Nailul Huda, believes that Indonesia’s economic resilience is now being viewed as vulnerable by investors due to pressure on the country’s fiscal condition and the widening budget deficit.

According to Huda, various reports from both international and domestic institutions highlight Indonesia’s fiscal management as a major weakness that influences investors’ perceptions of the national economy.

“Through various reports, both from international and domestic institutions, Indonesia’s economic resilience is considered vulnerable. One of the main focuses of almost all institutions is fiscal management,” Huda told Kompas.com on Friday (May 15, 2026).

He stated that this condition has the potential to trigger capital outflows and put further pressure on the rupiah’s exchange rate.

“Investors ultimately see Indonesia’s economy as being in danger because our fiscal deficit is too high, only for funding the National Economic Recovery (MBG) program,” he said.

According to Huda, the government’s fiscal space to encourage economic development is becoming increasingly limited amid rising debt obligations and interest payments.

He believes that this condition increases market concerns about the government’s long-term fiscal capacity.

“Fiscal space for economic development is shrinking, coupled with increasing debt payments and interest. The risk of default is increasing, and investors are afraid,” he said.

Therefore, Huda believes that Indonesia is not yet an attractive investment destination for global investors.

“That is why I think investors will not see Indonesia as an investment destination for the time being,” he said.

On the other hand, Huda also highlighted the government’s policy regarding the funding of the Red and White Village Cooperative (KDKMP) program, which is considered to be further burdening the state budget amid already heavy fiscal pressures.

According to him, state spending continues to increase while state revenues are not growing as fast as the government’s spending needs.

“State budget spending is increasing, state revenues are not increasing as much as spending. As a result, the state budget deficit is widening,” he said.

He believes that this condition has the potential to increase pressure on the state budget and have an impact on regional and village finances.