Indonesia’s Economic Landscape: January 2026 – Deficit, Spending and Currency Outlook

Indonesia’s economic performance in January 2026 revealed a state budget deficit of IDR 54.6 trillion (approximately USD 3.25 billion), driven by a significant surge in government spending. Despite concerns over fiscal discipline, the government remains committed to maintaining the deficit within the 3% of GDP limit. This report analyzes the key economic indicators, currency fluctuations, and recent market developments impacting Indonesia’s financial landscape.

January 2026 Fiscal Performance

The Indonesian government recorded a deficit of IDR 54.6 trillion in January 2026, representing 0.21% of the country’s Gross Domestic Product (GDP). This contrasts with a deficit of 0.09% of GDP in January 2025. The deficit was largely influenced by a 25.7% year-on-year increase in state spending, reaching IDR 227.3 trillion. State revenue also rose, increasing by 9.5% year-on-year to IDR 172.7 trillion, primarily due to a 30.7% increase in tax revenues.

The accelerated spending is attributed to priority programs aimed at maintaining purchasing power and driving economic growth in the first quarter of 2026. A significant portion of the increased expenditure was allocated to the Free Nutritious Meals (MBG) program initiated by President Prabowo Subianto, totaling IDR 19.5 trillion, compared to IDR 45.2 million in January 2025. Capital expenditure also saw a substantial increase, channeled into irrigation projects, connectivity, and food security initiatives.

Currency Performance and Market Sentiment

Despite robust foreign inflows into both fixed income and equities, the Indonesian Rupiah (IDR) has remained weak. As of January 19, 2026, the IDR closed at IDR 16,885 per USD, nearing the psychological barrier of 17,000. This weakness is attributed to fiscal concerns, a rebound in the Dollar Index (DXY), and limited absorption of excess Rupiah liquidity by Bank Indonesia (BI).

Finance Minister Purbaya Yudhi Sadewa believes the Rupiah has the potential to strengthen to around Rp15,000 per US dollar if economic fundamentals and regional currency trends align. Tempo.co reported on this outlook in February 2026.

However, concerns remain regarding the fiscal deficit, despite assurances from the Ministry of Finance to maintain it below the 3% cap. S&P’s affirmation of Indonesia’s BBB rating with a stable outlook reflects confidence in continued fiscal discipline.

Market Updates and Corporate Actions

• Bank Mandiri (BMRI): Net profit increased by 16% year-on-year in January 2026, reaching IDR 4.7 trillion.
• Bukalapak (BUKA): PT Creative Media Karya, a subsidiary of Elang Mahkota Teknologi (EMTK), increased its ownership stake in Bukalapak by acquiring approximately 4.5 billion shares.
• Surya Citra Media (SCMA): Eagle Crown Technology (EMTK) increased its direct ownership in SCMA by acquiring 300 million shares.
• BUMA Internasional Group (DOID): Secured a long-term mining services contract with Adaro Andalan Indonesia for the South Lubangan mining area in South Kalimantan.
• Barito Renewables Energy (BREN): Signed agreements with SLB to support geothermal development projects in Indonesia and North America.
• Bank Mega (MEGA): Plans to distribute bonus shares in a 1:1 ratio from share premium capitalization.
• Saranacentral Bajatama (BAJA): Plans a rights issue to settle debt.

External Factors and Economic Outlook

US President Donald Trump’s announcement of temporarily increasing tariffs on US imports to 15% from 10% poses a potential risk to global trade. However, Indonesia has a trade agreement with the US that may offer some protection, with the government seeking to maintain tariff exemptions for key exports like palm oil, coffee, and cocoa.

Bank Indonesia reported a 10% year-on-year increase in broad money supply (M2) in January 2026, reaching IDR 10,117.8 trillion. The government plans to extend the placement of IDR 200 trillion in state-owned banks for another six months, starting March 13, 2026, to support liquidity and credit growth.

Key Takeaways

• Indonesia experienced a fiscal deficit in January 2026 due to increased government spending.
• The Rupiah remains weak despite foreign inflows, influenced by fiscal concerns and global factors.
• Several corporate actions and market developments indicate ongoing investment and growth in key sectors.
• External factors, such as US tariff policies, pose potential risks to Indonesia’s economic outlook.

Looking ahead, the Indonesian government aims to maintain economic growth in the range of 5.5–6% year-on-year in the first quarter of 2026. Continued monitoring of global risks and proactive policy adjustments will be crucial to ensure economic stability and sustainable growth.