Fiscal Policy 2027 Directed as Growth Catalyst, Deficit Maintained Below 3%

The government is directing fiscal policy for 2027 to serve as a catalyst for driving higher economic growth amid ongoing global uncertainty. To support this objective, the 2027 State Budget (APBN) deficit is designed to be within the range of 1.80% to 2.40% of Gross Domestic Product (GDP). Minister of Finance Purbaya Yudhi Sadewa stated that the government will strengthen synergy between fiscal, monetary, financial sector, and investment policies to maintain economic stability while accelerating the improvement of public welfare. “The future economic outlook and the 2027 economic strategy are directed to encourage higher economic growth while accelerating welfare improvement,” Purbaya said during a virtual Working Meeting of Committee IV of the Regional Representative Council (DPD RI) on Monday (22/6). According to Purbaya, the State Budget will remain positioned as the primary development instrument focused on financing public needs, accelerating economic growth, and improving public welfare. Meanwhile, investment will be directed towards strategic sectors to accelerate national economic transformation. Monetary and financial sector policies will be focused on maintaining stability while supporting growth through adequate liquidity availability and competitive funding costs. With this pro-growth and pro-welfare strategy, the government hopes to achieve higher economic growth and faster welfare improvement. “So that efforts to drive growth and improve welfare run more effectively,” he stressed. Purbaya affirmed the government’s commitment to maintaining fiscal discipline even though fiscal policy space is made more flexible to respond to global dynamics. This commitment is reflected in the deficit target being kept below the 3% GDP limit and the debt ratio remaining under control below 60% of GDP. “So, amid high oil price pressures, we continue to keep the deficit to GDP ratio below 3%,” he said. He explained that the realised APBN deficit for 2025 is estimated at 2.81% of GDP, lower than the initial target of 2.9% of GDP. Meanwhile, for 2026, despite facing increased energy and electricity subsidy burdens, the deficit is still designed to be below 3% of GDP or close to 2.9%. According to him, if global oil prices decline again, the government will have greater fiscal space, including for strengthening regional economies. “If necessary, that could give us room to slightly strengthen the regional economy, but that depends on the President’s direction later,” Purbaya said. He stressed that the government’s fiscal flexibility will not disrupt the health of the State Budget. Various adjustment measures are taken to provide space for the economy without sacrificing fiscal sustainability. “We are taking optimal actions that provide economic space optimally while maintaining these limitations,” he stated. Purbaya also highlighted Indonesia’s consistency in maintaining fiscal discipline compared to several other countries that have higher deficits and debt ratios. According to him, amid global pressures, Indonesia has been able to keep its deficit below 3% of GDP and maintain its debt ratio at a safe level. To strengthen state financing resilience, the government continues to diversify funding sources, including exploring financing from China through a Panda Bond scheme, which is considered to potentially offer lower funding costs compared to conventional dollar-based markets. “So, we hope there will be alternative financing that gives us more flexibility when financing our budget deficit,” he said. Furthermore, Purbaya emphasised that future fiscal policy will remain responsive and anticipatory in facing global uncertainty. The government has prepared nine strategic policies to maintain economic stability and public purchasing power. “For this reason, fiscal policy, as usual, is maintained to be responsive and anticipatory to mitigate uncertainty,” he stated. These policies include maintaining the stability of subsidised fuel prices, stabilising food prices, and ensuring energy supplies and rice reserves remain at safe levels. According to Purbaya, these policies require a significant budget but are essential for maintaining public purchasing power and socio-economic stability. “We have provided massive assistance to maintain purchasing power and social and political stability, as well as to maintain economic stability. It is not perfect, but in the current situation, there are limitations,” he said. In addition, the government will continue to keep the fiscal deficit below 3% of GDP, promote spending efficiency and refocusing, optimise natural resource-based revenues, prepare stimulus packages to support purchasing power and the business sector, and improve the pattern of budget absorption to be more evenly distributed throughout the year. Purbaya explained that the pattern of government spending, which previously tended to accumulate at the end of the year, is now being shifted so that its impact on economic growth is more evenly spread throughout the year. “Usually, our government spending occurs only at the end of the year. Now we are shifting it to be even throughout the year. Therefore, at the beginning of the year, when spending is robust, the deficit will grow somewhat larger,” he said. The final strategic policy is strengthening the synergy between fiscal and monetary policy to maintain stability while supporting economic growth. According to him, economic resilience must be maintained.