Tomorrow Airlangga Reports to Prabowo: Could Iran Conflict Threaten Indonesia's Fiscal Position?
Jakarta – Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto will brief President Prabowo Subianto on Friday (13 March 2026) regarding developments in the domestic economy, as the armed conflict between Iran, the United States, and Israel disrupts global oil prices and threatens fiscal pressures, including for Indonesia.
This was disclosed by the Secretary of the Coordinating Ministry for Economic Affairs during a media gathering on Special Economic Zones (SEZ) in Jakarta on Thursday (12 March 2026).
“This afternoon the Coordinating Minister will likely explain to everyone after reporting to the President,” said Susiwijono.
Susiwijono stated that macroeconomic indicators remain sound, reflected in inflation figures staying within target at 3.5 per cent plus or minus 1 per cent, and the Manufacturing Index (PMI) in February 2026 reaching 53.8, the highest level in the past two years.
“Retail indicators, consumer confidence indices, and several purchasing power indicators also remain quite healthy,” he noted.
However, he stressed that there are indications of significant fiscal pressures resulting from the Middle East conflict, particularly due to rising energy prices, such as crude oil prices already above the 2026 State Budget macro assumption at US$70 per barrel.
“If the budget assumption is US$70 but today it is already above US$90, the difference means about US$20. Each US$1 increase results in our subsidy and compensation spending, particularly for energy, adding approximately Rp10.3 trillion to expenditure,” Susiwijono said.
Even if the potential fiscal pressure from ballooning energy subsidy and compensation spending is offset by possible windfall profits from rising commodity prices worth between Rp3.6 trillion to Rp3.7 trillion, Susiwijono noted that there remains an indication the state budget deficit could swell by approximately Rp6.7 trillion for each US$1 per barrel increase in oil prices from the macro assumption.
“So each US$1 could create a deficit of around Rp6.7 trillion for every US$1 increase. If it is US$20, you simply multiply it, so it would exceed Rp100 trillion,” he explained.
Nevertheless, Susiwijono assured that the government has devised various strategies to anticipate pressures resulting from the Middle East conflict, as this is not the first time the government has faced such crude oil price risks.
“But from past experiences in similar conditions, the impact ultimately extends beyond just the state budget; it affects all sectors, particularly in logistics and supply chain, with several constraints in the Strait of Hormuz and so on,” Susiwijono added.