Indonesia's Budget Deficit: Addressing Economic Challenges in 2025

Indonesia recorded a budget deficit of 321.6 trillion rupiah from January to August 2025, equivalent to 1.35% of Gross Domestic Product (GDP). Declining state revenues and increasing spending are the two main factors contributing to this deficit.

We will discuss what causes this deficit, its impact on the economy, and the steps taken by the government to address this problem.

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What Causes Indonesia's Budget Deficit?

From January to August 2025, Indonesia's state revenue was recorded at 1,639 trillion rupiah, a 7.8% decrease compared to the previous year. Meanwhile, state expenditure increased by 1.5%, reaching 1,960 trillion rupiah.

This decline in revenue was caused by weakening global trade, which impacted the export sector, as well as reduced domestic consumption. The increase in state spending was driven by government efforts to accelerate infrastructure projects and provide social assistance.

The Impact of the Budget Deficit on the Indonesian Economy

A rising budget deficit could impact Indonesia's economic stability. Although the Indonesian economy remains stable at around 5%, global uncertainty and slowing domestic consumption are impacting future growth prospects.

This large deficit also risks worsening the rupiah exchange rate, which has already depreciated by around 3% against the US dollar. This poses challenges for the government in managing foreign debt and maintaining public purchasing power.

Government Steps to Address the Budget Deficit

The Indonesian government has issued various policies to accelerate spending and reduce the deficit. Finance Minister Purbaya Yudhi Sadewa emphasized the importance of accelerating government spending for the remainder of 2025 to achieve the 5.2% economic growth target.

One of the main steps was the launch of an economic stimulus package worth nearly one billion US dollars, which included rice distribution, tax cuts, and temporary job creation in infrastructure projects.

In addition, the government also plans to attract foreign funds and encourage people to place their dollars in the domestic market to support the financing of national projects.

These measures aim to maintain liquidity in the economy and reduce dependence on external financing.

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Impact of Recovery Policies on the Economy

While these recovery measures are expected to improve the situation, significant challenges remain. Slowing global growth and domestic issues such as inflation and unemployment remain significant threats.

Therefore, Indonesia's economic recovery is highly dependent on the success of fiscal and monetary policies implemented by the government and Bank Indonesia.

Conclusion

Indonesia's budget deficit demonstrates the importance of prudent fiscal policy and prudent economic management. Although global challenges are impacting the economy, government measures to accelerate spending and provide stimulus are expected to mitigate the impact of the budget deficit.

It is hoped that this policy can support sustainable economic growth even amidst uncertainty.

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FAQ

What is Indonesia's budget deficit?

Indonesia's budget deficit is a situation where state expenditure exceeds state revenue. This is reflected in an unbalanced state budget.

What causes Indonesia's budget deficit?

This deficit was caused by a decline in state revenue due to weakening exports and domestic consumption, as well as increased spending on infrastructure projects and social assistance.

What is the impact of the budget deficit on the Indonesian economy?

Budget deficits can affect economic stability, worsen the rupiah exchange rate, and increase the risk of foreign debt.

What steps has the Indonesian government taken to address the budget deficit?

The Indonesian government is accelerating spending, launching economic stimulus packages, and encouraging people to place their dollars in the domestic market to support national projects.

What are the future prospects for the Indonesian economy?

Although Indonesia's economic growth is stable, global uncertainty and domestic issues such as inflation pose major challenges to the economy.