JAKARTA: Deputy Finance Minister Juda Agung says the government will push gross domestic product (GDP) growth beyond the baseline in the first quarter of 2026, banking on state spending and social assistance.
Juda, who was newly installed last Thursday after resigning as a Bank Indonesia deputy governor in mid-January, said on Feb 10 that the first-quarter GDP growth baseline was originally set at 5.5% but could be pushed to 5.6% on faster government spending.
“Some government spending could be done in this first quarter. Yes, there are some spending items that are normally slow. We’ll try and get them out fast,” he said on Tuesday, as quoted by CNBC Indonesia.
State spending is a key lever for boosting economic growth by virtue of a multiplier effect, wherein public expenditure pushes other growth sources, but typically falls behind schedule at the start of a year as ministries flesh out the year’s programmes and wait for approval.
Slow execution of state spending in the first quarter of 2026 might come at the cost of wasting potential growth momentum during the Ramadan and Idul Fitri holidays in February and March, respectively.
The peak Islamic holiday season is typically accompanied by high consumer spending, which in turn propels economic activity and, therefore, GDP growth.
Household spending is the backbone of Indonesia’s GDP, as it makes up more than half of the country’s economic output.
To capitalise on the seasonal spike in demand, the government frequently rolls out temporary fiscal stimulus over Ramadan and Idul Fitri, as is the case this year.
This year’s stimulus package amounts to 12.83 trillion rupiah, which comprises 11.92 trillion rupiah for food assistance and 911 billion rupiah for transportation tax waivers to incentivise holiday travel.
The planned food assistance includes 10kgs of rice and two litres of cooking oil per month in February and March for 35 million households.
The economy expanded 5.11% last year, Statistics Indonesia or BPS announced in a press conference last week, accelerating from the 5.03% recorded in 2024.
Growth in the fourth quarter of 2025 came in at 5.39% year-on-year (y-o-y), which Finance Minister Purbaya Yudhi Sadewa described as “lower than my estimate or my promise, but honestly, it’s pretty good”.
Purbaya, who took up his post last September, said economic growth would reach 6% in 2026 and 6.5% in 2027, “close to 7%” in 2028 and approach 8% in 2029.
The state budget plan envisions 5.4% growth this year.
Despite the improvement, the government missed last year’s 5.2% GDP growth target as set in the 2025 State Budget Law, as well as the 5.3% target set by the National Development Planning Agency (Bappenas).
Consumption in 2025 recorded lackluster growth of just 4.98% despite several stimulus packages totalling more than 100 trillion rupiah rolled out throughout the year.
Stimulus worth some 30 trillion rupiah, or 46.2 trillion rupiah when accounted for unrealised economic growth programmes from the previous year, was rolled out in the fourth quarter alone, which included transportation discounts during the peak travel season over Christmas and New Year. — The Jakarta Post/ANN
