World Bank: Indonesia's Fiscal Position Remains Stable Amid Rising Energy Prices
Indonesia demonstrates a tendency towards fiscal prudence, thereby having the relative capacity to continue providing support through energy subsidies, whether implicitly or explicitly.
Jakarta (ANTARA) - The World Bank assesses that Indonesia still has adequate fiscal room following the government’s decision not to raise prices of subsidised fuel oil (BBM) until the end of 2026, even as global oil prices continue to rise due to the escalation of the US-Israel and Iran conflict.
Head of Economics for East Asia and the Pacific at the World Bank, Aaditya Mattoo, stated that Indonesia’s fiscal deficit in 2025 is recorded at less than 3 percent of gross domestic product (GDP), while gross government debt is only around 40 percent of GDP.
“Indonesia shows a tendency towards fiscal prudence, thus having the relative capacity to continue providing support through energy subsidies, whether implicitly or explicitly,” he said in an online interview with ANTARA from Jakarta on Wednesday.
Nevertheless, Mattoo emphasised the importance of directing subsidies more accurately, reaching poor groups as well as vulnerable middle-class segments.
He assessed that the government needs to strengthen the subsidy distribution mechanism so that the benefits are truly felt by those in need, without causing excessive fiscal burdens in the future.
According to him, a more targeted subsidy design will reduce the risk of fiscal pressure while preventing long-term burdens that could hinder economic recovery.
“The more targeted the support, the smaller the risk to the fiscal burden,” he said.
He stated that the government has prepared measures and calculated the resilience of the State Revenue and Expenditure Budget (APBN) if global oil prices rise, whether to US$80 per barrel or US$100 per barrel.
In addition to the APBN budget, Purbaya stated that the government still has other funding sources to anticipate pressure from global oil prices, one of which is the remaining budget surplus funds (SAL) amounting to Rp420 trillion, including Rp200 trillion placed in banking.
He said that the government also still has various revenue positions that can serve as a buffer for subsidy budget needs, such as non-tax state revenues (PNBP) from the energy and mineral resources sector.
In the April 2026 edition of the East Asia and Pacific Economic Update report released on Wednesday, the World Bank projects Indonesia’s economic growth in 2026 at 4.7 percent, down from the previous estimate of 4.8 percent.
This figure is higher than the growth projection for the East Asia and Pacific (EAP) region, which is only 4.2 percent.