Indonesia Rupiah: Fiscal discipline supports stability – UOB

UOB economist Enrico Tanuwidjaja reviews Indonesia’s 2027 State Budget, highlighting a calibrated balance between growth and fiscal discipline that matters for the Rupiah and local bonds. The budget assumes a Rupiah exchange rate of Rp17,500 per US$, a 6.0% GDP growth target and a 2.40% of GDP deficit, with financing via disciplined sovereign bond issuance.

Budget assumptions shape Rupiah outlook

"The budget targets economic growth of 6.0%, supported by strategic public investment and prudent fiscal management, with the fiscal deficit projected to narrow to 2.40% of GDP."

"Rupiah Exchange Rate Rp17,500/US$. Reflects ongoing global financial market volatility and continued strength of the U.S. dollar."

"10-Year Government Bond (SBN) Yield 6.90%. Assumes stable domestic liquidity conditions and manageable sovereign risk premiums."

"Prolonged high interest rates in advanced economies or sustained U.S. dollar strength could place additional pressure on the rupiah and increase government borrowing costs, necessitating close coordination between fiscal authorities and Bank Indonesia."

"Financing requirements will be met through a disciplined combination of domestic and international sovereign bond issuance, helping maintain market confidence and funding flexibility."