Purbaya Bets on Aggressive Spending to Hit 6% Growth Amid Persian Gulf Tensions

JAKARTA, Investortrust.id — Indonesia is doubling down on a "spend-it-now" fiscal policy to insulate its economy from global tremors. Finance Minister Purbaya Yudhi Sadewa announced Wednesday that the archipelago’s economy is poised to grow between 5.5% and 6% in the first quarter of 2026, a bullish forecast underpinned by a massive surge in government outlays and a resilient domestic market.

The projection comes as Jakarta deliberately tilts its State Revenue and Expenditure Budget (APBN) into an early deficit. By February 28, the budget gap reached Rp135.7 trillion ($8.6 billion), or 0.53% of Gross Domestic Product. While a deficit might signal distress elsewhere, Mr. Purbaya framed it as a calculated maneuver to distribute economic stimulus more evenly throughout the calendar year.

The stakes for Southeast Asia’s largest economy are high. As the world’s leading exporter of nickel and a major player in coal and palm oil, Indonesia is attempting to transition from a raw-material exporter to a manufacturing powerhouse. This "downstreaming" policy—processing ores domestically—is now the primary engine tasked with maintaining growth momentum even as geopolitical tensions in the Middle East threaten to upend global energy prices.

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The Fiscal Gas Pedal

Government spending skyrocketed 41.9% year-on-year to Rp493.8 trillion ($31.3 billion) in the first two months of 2026. According to Purbaya, this "acceleration" is intended to bolster public purchasing power and fast-track "National Strategic Projects"—a suite of infrastructure works ranging from new toll roads to industrial parks.

"We are forcing the spending to be more distributed so that the impact of government intervention is felt immediately," Purbaya told reporters at the Ministry of Finance.

On the revenue side, the results are a study in contrasts. Tax collections surged 30.4% to Rp245.1 trillion ($15.5 billion), reflecting a "solid" domestic business environment. However, customs and excise receipts slumped 14.7%, a casualty of fluctuating commodity prices and shifting industrial dynamics.

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The Shadow of the Strait of Hormuz

The optimism in Jakarta is tempered by an escalating conflict in the Persian Gulf between Iran and the U.S. As a net oil importer, Indonesia is highly sensitive to crude price spikes. Mr. Purbaya identified three "transmission channels" through which the war could infect the domestic economy: trade, financial markets, and the state budget.

A closure of the Strait of Hormuz would likely trigger a flight to safety, strengthening the U.S. dollar and driving up the cost of funds—the interest rate at which the government and banks borrow. To date, the Indonesian Crude Price (ICP) has averaged $68.4 per barrel, comfortably below the budget's $70 assumption. However, the Minister warned that recent spikes to $110 or $120 per barrel would soon be reflected in the data.

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Resilience Amid Risk

Despite these complications, Indonesia’s internal metrics remain surprisingly stable. Inflation is holding at 4.76%, and while the "risk-off" sentiment in global markets has pressured the rupiah and sovereign bond (SBN) yields, the Ministry maintains that the volatility is manageable.

The government’s strategy relies on the APBN acting as a "shock absorber." By utilizing windfall profits from coal and palm oil exports, Jakarta hopes to fund energy subsidies and protect consumers from the brunt of global oil volatility without derailing its 6% growth target.

"We are monitoring these developments strictly to ensure our fiscal response remains prudent yet measured," Purbaya said.