This Week in the Indonesian Economy (13-19 Mar 2026)

The week of 13 to 19 March 2026 will be remembered as one of the most consequential in recent Indonesian economic history – a period in which the country simultaneously managed its largest annual mass migration, confronted a severe global energy shock, and pressed ahead with sweeping fiscal reforms. Rarely has the government been tested on so many fronts at once, yet the picture that emerges is one of a state straining to demonstrate resilience while acknowledging the considerable vulnerabilities that remain.

The Shadow of Hormuz

The dominant force shaping Indonesia’s economic week was not domestic in origin. The escalating conflict involving the United States, Israel, and Iran – which claimed the life of Supreme Leader Ali Khamenei in late February strikes – plunged global energy markets into turmoil. Iranian retaliatory attacks struck Qatar’s Ras Laffan LNG complex, facilities in Abu Dhabi, Kuwait, and Saudi Arabia, while Iran effectively closed the Strait of Hormuz to Western-aligned shipping. Brent crude surged past US$111 per barrel midweek, European gas futures leapt by up to 35 per cent, and analysts warned of prices exceeding US$150 per barrel if disruptions intensified. Iran also proposed levying tolls on Hormuz transits, and separately cut gas supplies to Iraq, eliminating some 3,100 megawatts of generation capacity from the Iraqi grid.

For Indonesia, a net oil importer that sources roughly 20 per cent of its crude from the Middle East, the consequences were immediate and multifaceted. Two Pertamina tankers – VLCC Pertamina Pride and Gamsunoro – remained detained in the Arabian Gulf as Energy Minister Bahlil Lahadalia conducted diplomatic negotiations with Tehran. Plastic traders in Jakarta’s Bukit Duri market reported procurement costs surging and customer walkouts. Airline ticket prices rose globally, with jet fuel prices climbing 83 per cent in a month according to IATA data, though Indonesia’s Ministry of Transport confirmed that international flight operations continued largely normally. Neighbouring countries offered a cautionary tale: Cambodia saw a third of its petrol stations close, Sri Lanka declared Wednesdays a national holiday to conserve fuel, and fuel prices rose sharply across at least 85 countries.

Indonesia’s response was a calibrated show of steadiness. Finance Minister Purbaya Yudhi Sadewa gave explicit guarantees that subsidised fuel prices would not rise, describing the state budget (APBN) as an economic “shock absorber.” Energy reserves were confirmed at 27 to 28 days nationally, above the minimum 21-day threshold, with electricity capacity running at 52 gigawatts against a peak load of 35 gigawatts. Coordinating Minister for the Economy Airlangga Hartarto outlined a strategy to keep the budget deficit below 3 per cent of GDP through a combination of spending efficiencies, revised coal work plans, and accelerated export taxes to capture windfall revenues from elevated global coal prices – which themselves rose to US$139 per tonne as Asian buyers pivoted away from constrained LNG supplies.

Fiscal Surgery and Industrial Vision

The energy crisis landed on top of a fiscal tightening already under way. President Prabowo Subianto announced that efficiency measures had already delivered savings of Rp308 trillion from central government expenditure, largely by cutting what he described as unproductive spending that he believed was fuelling corruption. Prabowo cited Indonesia’s Incremental Capital Output Ratio of 6.5 – well above the 4 recorded by Thailand and Malaysia – as evidence of systemic budget waste. Finance Minister Purbaya was tasked with directly setting percentage-based budget cut targets for ministries and institutions, focusing on unclear meetings, slow-impact programmes, and non-essential operational costs.

The cabinet also discussed reducing ministerial salaries and implementing work-from-home arrangements for civil servants one day per week, a measure Airlangga estimated could reduce daily fuel consumption by up to one-fifth. The initiative, drawing inspiration from Pakistan’s crisis response, was endorsed by President Prabowo and is expected to be rolled out after Eid, pending finalisation of technical details. Separately, Prabowo convened ministers to discuss accelerating the conversion of diesel power plants to solar, with the Danantara investment agency tasked with addressing related financing. A university-led study on fuel efficiency measures was ordered, with results expected by April.

On the structural side, Prabowo used a major address to articulate his “industrial tree” vision – a downstream processing strategy for commodities including bauxite, coconuts, coffee, and cocoa. His evident frustration that Indonesia, producer of some of the world’s finest coffee and chocolate, continues to import finished Starbucks and Nestlé products, captured the broader paradox of a resource-rich nation that has historically exported raw materials at depressed prices. The week also brought concrete downstream progress: Italian energy giant Eni finalised a Final Investment Decision worth over US$15 billion for the Gendalo-Gandang and Geng North-Gehem deep-sea gas projects off East Kalimantan, with production scheduled to begin in 2028 and peak at two billion cubic feet of gas per day in 2029. The swift 18-month approval process was widely read as a strong vote of confidence in Indonesia’s upstream investment climate. The Cisem Phase 2 natural gas transmission pipeline from Cirebon to Semarang also inaugurated its first gas flow, integrating supplies from eastern Indonesia into the national grid. In Batam, BP Batam backed solder tin exports by PT STANIA to India, a small but symbolic downstream win as Batam’s economy recorded 7.49 per cent annual growth in the fourth quarter of 2025.

Indonesia and Japan also signed memoranda on critical minerals and nuclear energy at the Indo-Pacific Energy Security Forum in Tokyo, with discussions on the US$20 billion Abadi Masela gas project targeting front-end engineering by mid-2026 and production by 2029 to 2030. Bank Indonesia, meanwhile, reported that the rupiah had weakened to Rp16,997 per US dollar, with net portfolio outflows of US$1.1 billion in March, though foreign reserves remained robust at US$151.9 billion. Governor Perry Warjiyo called for coordinated policy responses to maintain growth within the 4.9 to 5.7 per cent band.

The Great Lebaran Exodus

Against this turbulent backdrop, Indonesia managed the world’s largest annual short-term human migration with considerable – if imperfect – competence. Some 7.75 million people travelled by public transport in the week leading up to Eid, a 10.95 per cent increase year on year, with rail recording the strongest growth at 15.25 per cent. PT Jasa Marga recorded 1.48 million vehicles departing Jabodetabek between 11 and 18 March, a 30 per cent increase over normal traffic. Peak day on 18 March saw 270,315 vehicles exit the capital, with the Cikampek Utama toll gate recording a 401 per cent surge above normal. To manage flows, Transport Minister Dudy Purwagandhi officially launched a national one-way system from Kilometre 70 at Cikampek to Kilometre 414 at Kalikangkung in Semarang, later extended locally towards Bawen and Salatiga.

The Mohamed Bin Zayed elevated toll road was temporarily closed for approximately 1.5 hours on Thursday afternoon due to extreme density, with traffic redirected to the lower Jakarta-Cikampek route. Traffic accidents fell 2.8 per cent compared to the prior year, and fatalities dropped by 40 per cent – a notable achievement given higher vehicle volumes. The Japek II South toll road opened functionally, providing a free 52-kilometre alternative for vehicles from Bandung heading towards Jabodetabek. KCIC’s Whoosh high-speed train prepared over 650,000 tickets with 62 daily trips, up from 42, projecting a 25 per cent daily ridership increase. PLN deployed 4,769 electric vehicle charging stations nationally, supporting a projected 60 per cent rise in EV usage. Pertamina deployed 200 motorist delivery service units along mudik routes, 95 modular fuel stations, and 43 free Serambi MyPertamina rest stops.

The one major flashpoint was Gilimanuk Port in Bali, where the simultaneous Nyepi closure and Eid exodus created queues stretching up to 45 kilometres. State Secretary Prasetyo Hadi apologised publicly. Bali Governor Wayan Koster also offered his regrets, while ASDP deployed additional vessels, eventually clearing queues to zero kilometres before the Nyepi shutdown. The port closure ran from the afternoon of 18 March until the morning of 20 March. One tragic note: a 39-year-old housewife, identified by initials RP, died inside a bus queued at Gilimanuk, prompting a Ministry of Transport condolence statement and calls for travellers to prioritise health during long journeys.

The festive economy showed signs of strain alongside the celebration. Beef prices reached Rp180,000 per kilogram in Palembang and Pamanukan, while Jakarta prices hit Rp160,000, driven by demand ahead of Eid. Gold jewellery sales rose as households liquidated assets to fund holiday spending. An economist warned that the traditional THR-driven consumption surge could be partially offset by food inflation running at 12.66 per cent year on year and energy-related cost pressures. Money circulation during the Eid period was nonetheless projected at between Rp148 trillion and Rp162 trillion, with Bank Indonesia having prepared Rp185.6 trillion in cash.

Outlook

The weeks ahead will test the durability of Indonesia’s policy buffers. The government’s commitment to holding subsidised fuel prices is financially credible in the near term given existing budget frameworks, but analysts estimate each US$10 per barrel increase in oil prices adds Rp20 to Rp30 trillion to the import bill. Should Middle East hostilities persist and oil stabilise above US$110 per barrel, the arithmetic of keeping the deficit below 3 per cent while protecting subsidies, funding the Free Nutritious Meals programme for 82.9 million beneficiaries, and servicing a debt stock of Rp9,638 trillion will grow considerably more challenging. The work-from-home policy, coal windfall taxes, and downstream industrialisation push are all directionally sound responses, but their fiscal yield in 2026 will be modest compared to the scale of the external shock. The return Eid flow, expected to peak on 25 to 26 March and again on 28 to 29 March, will offer the next immediate test of the government’s transport management capabilities – and of whether Indonesia’s infrastructure investments are finally beginning to match the ambitions of its annual mass migration.