In a bold fiscal move, Indonesia plans to unleash Rp 2,121 trillion in government spending during the second half of 2025. With economic growth still below target, the state budget (APBN) becomes the key instrument to stimulate consumption, investment, and public services—while maintaining governance and accountability.
Key Facts & Background
- Total planned government spending (H2 2025): Rp 2,121 trillion.
- Objective: Support economic growth to reach the 5.2% year-end target.
- H1 2025 spending realization: Rp 1,406 trillion, with only 0.6% growth compared to the previous year.
- Central government: Rp 1,003.6 trillion
- Transfers to regions: Rp 402.5 trillion
- Q2 2025 government consumption contracted 0.33% YoY, contributing just 6.93% to GDP growth.
- Q1 2025 contraction was deeper at 1.37%, due to cabinet restructuring and budget realignment.
- Key programs in H2 include:
- Free nutritious meals
- Affordable housing (FLPP)
- School development
- Expanded credit for MSMEs (KUR)
- Rp 10.8 trillion in additional stimulus for Q3
Strategic Implications
Indonesia’s aggressive fiscal stance in H2 2025 signals a counter-cyclical strategy to offset weak government consumption and ensure growth momentum. With private consumption and exports performing steadily, public spending becomes the critical lever to close the gap toward the 5.2% GDP target.
The Rp 2,121 trillion injection is not just about volume—it’s about quality and timing. Ministries and local governments must accelerate budget absorption while ensuring clean governance and impact-driven allocation. Missteps could dilute effectiveness and widen the fiscal deficit, which is already projected to reach Rp 662 trillion or 2.78% of GDP.
Strategically, the focus on social programs, infrastructure, and MSME financing reflects an effort to stimulate inclusive growth and protect vulnerable segments. If executed well, this could reinforce domestic demand, improve labor absorption, and catalyze private sector confidence.
However, the contraction in government consumption despite available funds highlights persistent execution bottlenecks—from procurement delays to bureaucratic inertia. Overcoming these challenges will be key to translating budgetary ambition into real economic outcomes.