Indonesia's 2026 Budget Deficit Could Reach 3.1%, Economist Warns

Indonesia's 2026 budget is facing a macroeconomic environment that looks very different from the assumptions used when it was approved.

The state budget was built around an Indonesian Crude Price of $70 per barrel and an average exchange rate of Rp16,500 per U.S. dollar.

By August, the average Indonesian crude price for the first eight months of the year had risen to roughly $89.24 per barrel.

The rupiah has also weakened substantially, with Bank Indonesia's JISDOR reference rate reaching Rp17,813 per dollar on September 21 and Rp17,883 the following day.

Those shifts have revived questions about whether Indonesia can keep its full-year fiscal deficit below the statutory 3% of GDP threshold.

The Official Forecast Is Still 2.85%

The Indonesian government has not forecast a 3.1% deficit.

Its latest full-year outlook remains 2.85% of GDP, equivalent to about Rp734.3 trillion.

That projection is already wider than the 2.68% deficit target approved in the original 2026 state budget.

The distinction is important.

A 3.1% figure currently comes from an economist's risk scenario, not from the Ministry of Finance.

The Actual Deficit Is Still Much Smaller

Through August, Indonesia's budget deficit stood at Rp240.1 trillion, or 0.93% of GDP.

Government revenue reached Rp2,055.6 trillion while expenditure was around Rp2,295 trillion.

The Ministry of Finance said the primary balance remained positive and described fiscal execution as still broadly on track.

That means the 2.85% figure is a year-end projection rather than the deficit already recorded.

Oil Is the Biggest Assumption Miss

Indonesia's oil-price path has been volatile.

ICP was $64.41 per barrel in January and $68.79 in February.

It jumped to $102.26 in March and $117.31 in April as geopolitical tensions disrupted energy markets.

It then eased to $106.56 in May, $83.45 in June and $81.68 in July before rebounding to $89.43 in August.

A simple average of those eight monthly figures is about $89.24.

That is materially above the $70 assumption embedded in the 2026 budget.

But Higher Oil Has More Than One Fiscal Effect

High oil prices can increase government spending.

Indonesia uses the budget to cushion households and businesses from energy-price volatility through subsidies and compensation.

If international energy costs rise while domestic administered prices do not fully adjust, the state budget can absorb a larger portion of the difference.

A weaker rupiah can reinforce that pressure because imported energy and other dollar-linked costs become more expensive in local-currency terms.

But the effect is not entirely negative.

Higher commodity prices can also support tax and non-tax revenue.

By August, non-tax state revenue had reached Rp435.1 trillion, up 41.7% year on year, while total state revenue was up 25.4%.

The net fiscal effect therefore depends on both sides of the budget.

The March Stress Test Was More Severe Than the Budget

Earlier this year, the government publicly presented stress scenarios showing what could happen if oil, the rupiah and borrowing costs moved sharply against the budget assumptions.

One scenario used an ICP assumption of approximately $86 per barrel, a rupiah rate of Rp17,000 per dollar, 5.3% economic growth and a 6.8% government bond yield.

Under that combination, the deficit was estimated at 3.18% of GDP.

This corrects one detail in the original draft: the scenario used about $86 oil, not $89.

A more adverse scenario using $97 oil and Rp17,300 per dollar produced an estimated 3.53% deficit.

A still more pessimistic combination—$115 oil and Rp17,500—produced a 4.06% estimate.

These were stress tests, not baseline forecasts.

Today's Data Are Not Exactly the Same as the Stress Assumptions

There is another methodological caveat.

Indonesia's state-budget exchange-rate assumption is an annual average.

A JISDOR quote for one particular trading day is a point-in-time market reference.

Comparing Rp17,813 directly with the Rp16,500 annual budget assumption is useful for illustrating pressure, but it is not an exact like-for-like comparison.

The same applies to oil.

The full-year fiscal impact will depend on the average price for the entire year, not only the level recorded in August.

INDEF Sees a 2.9%–3.1% Range

M. Rizal Taufikurahman, head of INDEF's Center of Macroeconomics and Finance, now sees the 2026 deficit potentially ending between 2.9% and 3.1% of GDP, according to a CNBC Indonesia report.

He argues that prolonged oil prices around current elevated levels, a rupiah in the Rp17,000–Rp18,000 range and unchanged domestic energy prices would transfer more pressure to the state budget.

His upper estimate would put the deficit slightly above Indonesia's normal statutory 3% ceiling.

But it remains a forecast, not an observed fiscal outcome.

BCA Expects About 2.9%

BCA Chief Economist David Sumual takes a somewhat less pessimistic view.

He expects the deficit to remain below 3%, at around 2.9% of GDP.

His assessment points to government budget rationalization and adjustments to priority spending as potential buffers against the pressure from oil and the exchange rate.

UOB Kay Hian Sees 2.7%–2.9%

UOB Kay Hian economist Surya Wijaksana gives an even lower range of roughly 2.7%–2.9%.

He points to government efficiency measures and relatively strong tax and non-tax revenue supported by commodity prices.

The different forecasts illustrate that there is no consensus that Indonesia will breach 3%.

The current range of views spans from below the government's 2.85% outlook to slightly above the legal ceiling.

Why 3% Matters

Indonesia's State Finance Law establishes a normal maximum fiscal deficit of 3% of GDP.

The threshold has long served as an anchor for fiscal credibility and debt management.

The government's latest 2.85% outlook is only 0.15 percentage point below that threshold.

But that arithmetic should not be confused with the current fiscal position: the actual deficit through August was only 0.93% of GDP.

Revenue Performance Is a Key Counterweight

The final deficit will depend heavily on fourth-quarter revenue.

By August, government receipts were performing strongly.

Revenue had reached Rp2,055.6 trillion, equivalent to 65% of the annual target, with tax revenue rising 24.1% year on year and non-tax revenue rising 41.7%.

If that momentum persists, higher receipts could offset some of the spending pressure generated by energy prices.

If it weakens, the government's room to protect the deficit without cutting expenditure becomes narrower.

Spending Quality Matters Too

Reducing spending is one way to defend the fiscal ceiling, but economists have emphasized that the composition of cuts matters.

Rizal has argued that fiscal discipline should not be achieved simply by reducing productive expenditure that supports investment, demand or long-term capacity.

That creates a policy trade-off.

Aggressive spending restraint can protect the headline deficit but may weaken economic activity if it targets high-multiplier programs.

Efficiency in low-priority or low-impact spending would have a different economic effect.

The Government Still Says the Budget Is on Track

The Ministry of Finance's official message remains more reassuring.

Finance Minister Suahasil Nazara said in the September APBN KiTa briefing that the budget through August remained strong, credible and relatively on track.

The ministry emphasized stronger revenue, more effective and productive expenditure and continued management of the deficit at a healthy and controlled level.

Net government debt financing of Rp506 trillion through August was also described as consistent with the financing plan.

What Will Decide the Final Number?

Five variables are likely to matter most through year-end.

The first is the average oil price for September through December.

The second is whether the rupiah remains substantially weaker than the budget assumption.

The third is tax and non-tax revenue performance.

The fourth is the cost of energy subsidies and compensation.

The fifth is how aggressively the government reprioritizes expenditure.

Changes in any one of those variables could move the final deficit away from current forecasts.

Bottom Line

Indonesia's 2026 fiscal risks have clearly increased compared with the assumptions used to build the state budget.

The budget assumed $70 oil and an average exchange rate of Rp16,500 per dollar.

Through August, ICP averaged roughly $89.24, while the rupiah was trading above Rp17,000 in September.

Still, a deficit above 3% is not yet the official outcome or official government forecast.

The actual deficit through August was 0.93% of GDP.

The government's year-end outlook is 2.85%.

Economist forecasts now range from roughly 2.7% to 3.1%.

The most accurate conclusion is therefore that the risk of approaching or slightly exceeding the 3% threshold has increased, but the final outcome remains highly dependent on oil prices, the rupiah, government revenue, energy support costs and spending decisions in the final months of 2026.