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View all search resultsMeeting Indonesia’s growth, and deficit, targets
In parallel with growth, the government must have a dedicated focus on the revenue side of reducing the deficit, particularly in drawing businesses out of the shadow economy and into the real economy.
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President Prabowo Subianto stands atop the dais on Aug. 14, 2026, prior to delivering his State of the Nation Address and the 2027 state budget proposal during the plenary meeting of the People's Consultative Assembly (MPR) at the Senayan Legislative Complex in Central Jakarta. (Reuters/Stringer)
P
resident Prabowo Subianto’s Financial Note speech earlier this month, in its essence, had two main points: Growth needs to increase and the budget deficit needs to fall.
Start with growth. From one perspective, the recipe for 6 percent growth is as simple as that for nasi goreng: Cut regulations that harm growth, train workers, target industries that drive growth and welcome foreign investment.
But just as there are many variations of the national dish across Indonesia, so too must the government think carefully about how it can drive growth in varied sectors, from manufacturing to agriculture, extractive industries and financial services, without dictating to markets in a way that would distort or slow growth. State-owned enterprises have a key role to play in growth but should not dominate the economy in a way to reduce the vitality of the private sector.
Still, moving from a gross domestic product growth rate of 5.45 percent in the first half of 2026 to 6 percent next year is realistic; with the right policies and spending restraint.
Indonesia's economy is currently sustained by household consumption and foreign direct investment. However, government fiscal stimulus is often skewed toward the upper class, even though the middle class remains a vulnerable group that is still in a consumptive rather than productive stage. If the government aims to achieve 6 percent growth, policy focus must be directed toward major sectors that absorb significant amounts of labor.
Further, the nature and drivers of growth require special attention. The slowdown in household consumption from 5.52 to 5.06 percent of GDP indicates that public purchasing power has not yet fully recovered.
On the other hand, government consumption, which grew nearly 16 percent, served as a key driver of growth.
