MUFG’s Senior Currency Analyst Lloyd Chan notes Indonesia enters 2026 with solid growth momentum but rising fiscal and policy risks. Weak 2025 tax revenues and an 11.3% planned expansion of the 2026 budget raise concerns, though MUFG still expects the deficit to remain within the 3% statutory limit as authorities balance growth priorities with broadly prudent and measured policy settings.
Fiscal expansion balanced by deficit discipline
“Fiscal risks have increased following weak tax revenue collection in 2025 and plans to expand the 2026 budget by 11.3%, which rely on a strong rebound in government revenues.”
“That said, we continue to expect the authorities to keep the fiscal deficit within the 3% statutory limit.”
“While economic growth remains a policy priority, it is likely to be pursued in a broadly prudent and measured manner.”
“Some structural challenges persist despite resilient headline GDP growth data, including productivity growth that appears to have stagnated relative to that of the US, while the current account remains reliant on the commodities outlook.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/indonesia-fiscal-and-growth-outlook-under-scrutiny-mufg-202602111934
