Indonesia Unveils $1.66 Billion Stimulus Package to Buffer Economy Against Global Volatility

JAKARTA, Investortrust.id — President Prabowo Subianto’s administration is moving aggressively to insulate the Indonesian economy from mounting global headwinds. Coordinating Minister for Economic Affairs Airlangga Hartarto officially announced an eight-point stimulus package today, injecting Rp 26.34 trillion ($1.66 billion) into the economy to bolster growth and soften the impact of turbulence stemming from the Middle East.

For international investors, this stimulus is a clear signal that Jakarta is prioritizing domestic consumption and industrial efficiency. By subsidizing logistics and critical raw material imports, the government is lowering the cost of doing business while simultaneously putting more purchasing power into the hands of its citizens. This dual approach aims to keep the economy expanding at its target clip even as global commodity prices and shipping logistics face renewed pressure.

The bulk of the funding—a massive Rp 18.04 trillion ($1.14 billion)—is dedicated to social safety nets. This includes continuing the food assistance program for 33.24 million beneficiaries through September to keep inflation in check and ensure food security for the country’s most vulnerable populations.

Driving Mobility and Consumer Spending

Recognizing that travel is a vital engine for local economies, the government is slashing costs for travelers during the upcoming school break and the year-end holiday season. This includes heavy discounts on state-owned railway operator Kereta Api Indonesia and the national passenger shipping firm, Pelni.

Most notably, the government is implementing a temporary 11% Value Added Tax (VAT) cut on domestic commercial flights. This aggressive policy is expected to move over 2 million passengers during the peak school holiday season, effectively creating a demand shock in the hospitality and tourism sectors.

"According to President Prabowo’s directives, we are announcing this stimulus for the second semester of 2026," Airlangga stated during the press conference held in Jakarta on Monday.

Boosting Industrial Competitiveness

Beyond consumption, the government is taking aim at manufacturing costs to drive export competitiveness. By reducing import duties to 0% for LPG and raw plastic materials, the administration aims to lower production costs for the petrochemical industry by an estimated Rp 2.25 trillion ($141.5 million).

Additionally, the government is incentivizing the maintenance, repair, and overhaul (MRO) industry by eliminating import duties on aircraft spare parts. With a dedicated budget of Rp 500 billion ($31.4 million), this move aims to solidify Indonesia’s position as a regional hub for aviation maintenance, capitalizing on the country’s vast domestic flight market.

The administration is also tackling labor market challenges head-on with a Rp 6.26 trillion ($393.7 million) investment in vocational training and internship programs. By targeting 220,000 vocational school graduates and tens of thousands of workers affected by recent layoffs, the government is attempting to realign the workforce with the needs of a modernizing, industrial-focused economy.