Indonesia Maintains Fiscal Discipline as Government Injects Liquidity to Support Q4 Growth

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JAKARTA, Investortrust.id — Finance Minister Purbaya Yudhi Sadewa explains on Thursday Nov 20, 2025 in Jakarta that Indonesia keeps growth near 5 percent with low inflation as the Finance Ministry injects Rp 276 trillion, equal to about $17 billion, of government funds into banks to reinforce lending and keep liquidity ample.

He says, “Our state budget is the shield that protects Indonesia as we pass through obstacles in every period while still moving optimistically toward one goal, a stronger and more prosperous Indonesia.”

He opens the presentation by noting that global uncertainty has continued, but tensions between the United States and China have started to ease and the Federal Reserve has lowered its policy rate for the second time this year. “This gives a positive signal for global economic stability,” he says.

Global manufacturing activity remained in expansion territory with a purchasing managers index of 50.8 in October, while Indonesia recorded a higher reading of 51.2. “This shows that our manufacturing sector is not only expanding but is also more robust than the global average,” Purbaya says.

He explains that China’s economy has slowed, but Southeast Asia including Indonesia has remained resilient. “Even in the middle of global headwinds, demand for our exports is still strong and domestic demand is getting stronger,” he says.

Commodity prices moved in mixed directions as coal, oil, and nickel weakened year on year while copper and palm oil strengthened. “The strengthening of copper prices is driven by worries about tighter supply and the end of the United States government shutdown,” he says, adding that these price swings have a direct impact on Indonesia’s export performance and budget revenues.

Exchange rates showed diverse movements, with the Russian ruble, Brazilian real, Mexican peso, and euro appreciating against the dollar. “The rupiah has weakened 3.7 percent year to date, but this is still moderate compared with Turkey which is down 19.6 percent and Argentina which has depreciated 36.1 percent,” he says.

He stresses that currency stability remains a priority. “We continue to safeguard the exchange rate through close coordination with Bank Indonesia in the Financial System Stability Committee,” Purbaya says.

Stock markets around the world have risen, including in Korea, South Africa, and Brazil. “Our own stock index has grown 18.2 percent year to date, which is a strong performance supported by portfolio inflows and improving expectations for domestic growth,” he says.

Indonesia maintained a cumulative trade surplus of 33.48 billion dollars through September with a monthly surplus of 4.34 billion dollars. “Exports have grown 11.4 percent while imports are up 7.2 percent, showing that our domestic industrial activity is increasingly active even as global demand remains solid,” he says.

The current account posted a surplus of 4 billion dollars in the third quarter, equal to 1.1 percent of GDP. “The surplus is mainly supported by the trade balance, while the capital and financial account recorded a deficit, which means there is still capital outflow pressure,” he says.

Financial markets remained stable despite global volatility and a repositioning of foreign investors in the bond market. “We saw large outflows of Rp183.8 trillion since January, but at the same time there has been a significant inflow into the equity market in November of Rp7.3 trillion,” Purbaya says.

Inflation remained within target in October at 2.86 percent, with core inflation at 2.36 percent and administered prices up 1.45 percent. “This shows a healthy level of demand and good price stability, which is crucial for protecting people’s purchasing power and keeping economic activity strong,” he says.

He acknowledges that volatile food prices are still a challenge. “Even so, the government has managed to control food price pressures quite well through the role of the state food agency in stabilising rice prices and strengthening stocks of other strategic food items,” he says.

Purbaya highlights that Indonesia’s inflation is still low at about 2.9 percent year on year compared with many peers. “Countries such as Vietnam, South Africa, and Mexico are in the 3 to 4 percent range, while Argentina and Turkey face inflation above 30 percent,” he says.

Indonesia’s economy grew 5.04 percent in the third quarter, supported by domestic demand and strong export performance, resilient investment, and the optimisation of government spending. “After contracting in 2020, our economy recovered quickly and has remained around 5 percent growth from 2023 to 2025, which shows our resilience even when the world is full of uncertainty,” Purbaya says.

He explains that household consumption, the largest component of GDP, grew 4.89 percent in the third quarter, while investment rose 5.04 percent. “Exports increased 9.91 percent and imports grew more slowly, so net exports gave a positive contribution to growth,” he says.

Government consumption also strengthened. “In the past the government budget was braking the economy, now government spending has changed direction and is stepping on the accelerator,” he says, pointing to the turnaround of government expenditure growth from negative to above 5 percent.

On the production side, manufacturing grew 5.54 percent, trade 5.49 percent, transportation 8.62 percent, and information and communication 9.65 percent. “Most sectors have turned around to positive territory, which means the recovery is broad based,” Purbaya says.

Agriculture accelerated from 1.62 percent in the second quarter to 4.93 percent in the third quarter, helped by food security programs. “This is crucial to improve farmers welfare, support poverty reduction, and achieve our food resilience goals,” he says.

Tourism related sectors also improved as domestic tourism strengthened. “Transport and accommodation as well as food and beverages both grew strongly above 8 percent in the third quarter, showing that the tourism ecosystem is recovering,” he says.

Purbaya notes that spatially, Indonesia’s growth is becoming more balanced. “Sulawesi has often grown above 7 percent on average and in this quarter reached 5.84 percent, while Java still contributes 56.7 percent of the economy and grew 5.17 percent, and other regions such as Sumatra, Maluku, Papua, Bali, and Nusa Tenggara also recorded solid growth,” he says.

He then turns to indicators of future demand. “Optimism among households for both consumption and production is improving,” he says, citing stronger durable goods purchases, higher motorcycle sales, and improving car sales.

“The manufacturing PMI is at 51.2, which indicates continued expansion, and the consumer confidence index stands at 121.2, meaning people are firmly optimistic about economic conditions now and in the next six months,” Purbaya says.

He explains the government’s liquidity strategy in more detail. “The Rp200 trillion placement in state owned banks and Bank Syariah Indonesia has been channelled into loans amounting to Rp88 trillion as of the end of October,” he says.

On the additional Rp76 trillion placement made on Nov 10 into three major state banks and a regional bank, he says, “We saw base money growth fall from around 13 percent to about 7.8 percent, so we thought it needed to be pushed up again and we injected another Rp76 trillion to strengthen liquidity in the system.”

He underlines that the aim is to keep funding costs down so that credit rates can fall. “Deposit rates for six month tenors have already dropped significantly from 6 percent to 5.2 percent, and we expect this to be passed through to lending rates,” he says.

Indonesia’s macro indicators continued to improve. “Ten year government bond yields have fallen to 6.11 percent, which is very low for Indonesia and reflects strong domestic demand in the bond market,” Purbaya says.

He notes that the lower bond yield environment helps the budget. “This creates a cost of funds that is lower than what we assumed in the state budget, so in this area I am a bit lucky,” he says.

State revenue reached Rp2,113.3 trillion by 31 October, equal to 73.7 percent of the outlook, driven by Rp1,708.3 trillion in tax revenue and Rp402.4 trillion in non tax income. “Even with moderation in commodity prices, our revenue performance remains relatively on track,” Deputy Finance Minister Suahasil Nazara says.

He details tax collection dynamics. “Gross tax receipts reached Rp1,799.5 trillion, already above last year, but net receipts are at Rp1,459.03 trillion, which is slightly below last year because of higher tax refunds,” Suahasil says.

He adds that customs and excise revenues reached Rp249.3 trillion, up 7.6 percent year on year, with strong contributions from export duties on palm oil and concentrates. “We also stepped up enforcement against illegal cigarettes, with 954 million sticks seized, which is about 41 percent higher than last year, although it is still below the estimated total volume of illicit cigarettes,” he says.

Non tax revenues from natural resources fell as oil prices, coal prices, and volumes came in below APBN assumptions. “The consolidated dividends of state companies are now managed by the sovereign wealth fund rather than flowing directly into the budget, so this also changes the composition of non tax revenue,” Suahasil says.

Government spending reached Rp2,593.0 trillion or 73.5 percent of the outlook, with central government spending at Rp1,879.6 trillion, higher than last year by Rp45.1 trillion. “This shows that central government spending has given a stronger push to economic growth this year,” he says.

He explains that goods spending has accelerated after early year efficiency measures, while capital expenditure tends to bunch in November and December. “We are pushing hard so that capital spending can catch up in the last two months of the year and give an additional boost to growth,” Suahasil says.

Subsidies and compensation payments to energy and non energy programs were also on track. “From fuel and LPG to electricity, fertilizer, and subsidised housing, quotas are still sufficient to last until the end of the year,” he says.

Priority programs such as social protection, health services, and infrastructure upgrades progressed as planned. “For the Free Nutritious Meals program, realised spending has reached Rp41.3 trillion or about 58 percent of the Rp71 trillion allocation, with beneficiaries spread across all provinces,” Suahasil says.

He also reports progress on the nationwide internship scheme for fresh graduates. “So far 16,112 participants have been accepted from more than 171,000 applicants, and they receive job training, a stipend, and social security coverage for six months,” he says.

Regional budget performance remained a concern. “Transfers to regions have reached Rp713.4 trillion and are now in local budgets, but local spending on goods and capital is still lower than last year, while deposits in banks have risen to Rp244 trillion,” Suahasil says.

He calls on regional governments to accelerate spending. “We have sent letters to all provinces, districts, and cities, urging them to speed up spending in November and December so that the money we have transferred does not just sit in bank accounts but truly moves the real economy,” he says.

On the financing side, the government used a combination of debt and non debt instruments. “Budget financing is guided by the approved deficit of 2.78 percent of GDP in the mid year outlook, and we have permission from parliament to use Rp85.6 trillion of excess budget balance to reduce bond issuance this year,” Suahasil says.

Director General of Financing Suminto explains that bond markets have responded positively. “The spread between our ten year dollar bond and the United States Treasury has narrowed to about 57 basis points, down from 84 basis points at the start of the year, and the spread between our local currency ten year bond and the US Treasury is about 196 basis points, much lower than many peers,” he says.

He highlights the success of Indonesia’s latest global sukuk issuance. “Early this morning we completed the book building for a 2 billion dollar global sukuk with tenors of five and ten years, with yields of 4.5 percent and 5.0 percent, and orders peaked at 5.8 billion dollars or 2.9 times the issue size,” Suminto says.

“This is the lowest spread in our history, which shows that international investors trust us very much,” Purbaya adds.

During the question and answer session, Purbaya also addresses the issue of illegal imports of used clothing. “I do not need to deal with the business of thrifting,” he says. “What I will clamp down on are illegal goods entering Indonesia, and I will clean this country of goods that enter illegally.”

He uses an analogy to underline his point. “If I collect tax from marijuana, would that make marijuana legal,” he asks. “Illegal goods are illegal, regardless of whether they pay tax or not.”

On unspent ministry and agency budgets, he says the government will continue to monitor and reallocate where necessary. “If there are institutions that cannot spend, we look for those that can accelerate, and if not, we will use the returned funds to reduce the budget deficit so that it remains under control,” he says.

He also comments on the new practice of inviting a government representative to the monthly monetary policy meeting of Bank Indonesia. “This is a positive development, because it allows the government’s views to be heard directly when the central bank decides on interest rates, even though we only have the right to speak, not the right to vote,” he says.

Concluding the press conference, Purbaya emphasises the central role of the state budget. “The state budget remains our main instrument for stabilising the economy and accelerating development,” he says. “We must ensure that priority programs run effectively and that protection for the people is strengthened while we face a dynamic global economy.”