Indonesia’s fiscal position at the close of 2025 showed a widening deficit, reflecting both structural challenges and deliberate policy choices. The government reported a shortfall of Rp 695.1 trillion, equal to 2.92% of GDP, slightly higher than the previous year. Officials emphasized that the increase was part of a countercyclical approach to sustain economic expansion amid revenue pressures.
Key Facts & Background
- Deficit Figures:
- APBN deficit in December 2025: Rp 695.1 trillion or 2.92% of GDP.
- Higher than 2024’s deficit of 2.3% of GDP.
- Original target for 2025 was 2.53% of GDP, later adjusted upward.
- Revenue Pressures:
- Decline in income tax receipts, falling short of expectations.
- Rp 80 trillion in state-owned enterprise dividends redirected to Danantara, reducing government revenue.
- Government Response:
- Finance Minister Purbaya Yudhi Sadewa announced plans to strengthen the Directorate General of Taxes within two months.
- Measures include improving systems such as Coretax and tightening oversight to prevent irregularities.
- Policy Position:
- Deficit capped at below 3% of GDP, in line with fiscal rules.
- Increase framed as a countercyclical policy to maintain economic growth.
- Economic growth assumption for 2026 set at 5.4%, with hopes of achieving higher levels.
Strategic Insights
The rise in Indonesia’s budget deficit to 2.92% of GDP illustrates the tension between fiscal discipline and the need to sustain economic momentum. While revenue shortfalls from taxes and dividend transfers created pressure, the government opted to allow a wider deficit rather than risk slowing growth. This reflects a pragmatic approach where fiscal policy is used as a stabilizing tool, even if it means temporarily breaching earlier targets. The emphasis on countercyclical measures shows a willingness to prioritize expansion over strict adherence to deficit reduction.
Looking ahead, the government’s commitment to keeping the deficit below 3% signals caution, but the real test will be in strengthening revenue collection. Efforts to modernize tax administration and close loopholes are critical for long-term sustainability. If successful, these reforms could reduce reliance on borrowing and create more fiscal space for investment. The trajectory of Indonesia’s deficit will therefore depend not only on expenditure management but also on the effectiveness of structural reforms in revenue generation, shaping the country’s fiscal resilience in the years to come.