US-Iran Conflict Could Widen Indonesia's Budget Deficit by IDR 200 Trillion, Says CORE

Jakarta – Economist Yusuf Rendy Manilet from the Center of Reform on Economics (CORE) has estimated that Indonesia’s 2026 budget deficit (APBN) could widen by as much as IDR 200 trillion as a result of the escalating conflict between the United States and Iran.

According to Yusuf, the impact of the Middle Eastern geopolitical tensions on Indonesia’s budget could come through two primary channels: rising crude oil prices and weakening of the rupiah exchange rate.

“Both carry direct consequences for government spending, particularly through energy subsidies and debt servicing costs,” he said in an interview with ANTARA in Jakarta on Monday.

Regarding oil prices, Yusuf clarified that the conflict’s impact on the budget tends to be net negative. Based on 2026 budget simulations, each USD 1 increase in crude oil prices raises government revenue by approximately IDR 3.5 trillion, but simultaneously increases government spending by roughly IDR 10.3 trillion.

This means that net deficit widening amounts to approximately IDR 6.8 trillion for each USD 1 increase in oil prices.

“In a moderate scenario, where oil prices rise by approximately USD 15 per barrel, the budget deficit could potentially widen by more than IDR 100 trillion. In a more severe scenario, the deficit widening could exceed IDR 200 trillion,” Yusuf stated.

Regarding rupiah depreciation, this increases government spending, particularly for energy subsidies and foreign currency obligations. Yusuf estimates that each IDR 100 weakening against the dollar can increase government spending by approximately IDR 6.1 trillion, whilst additional revenue only reaches about IDR 5.3 trillion.

“As a result, the deficit continues to widen by approximately IDR 0.8 trillion for each IDR 100 depreciation. Should the rupiah weaken to IDR 1,500, the additional deficit pressure could reach approximately IDR 12 trillion,” he explained.