Indonesia launches second half economic stimulus plan
Recently, the Indonesian government announced the launch of an economic stimulus plan for the second half of 2026, with a total amount of 26.34 trillion Indonesian rupiahs (approximately 2630 Indonesian rupiahs), covering multiple areas such as transportation subsidies, food aid, vocational training and internship programs, and industrial support. Indonesian Minister of Economic Coordination, Elronga Hartato, stated that this economic stimulus plan aims to maintain public consumption, enhance purchasing power, help sustain the country's economic growth momentum until the end of the year, and provide support for achieving the annual economic growth target of 5.4%.
Since the beginning of this year, due to fluctuations in international energy prices and rising uncertainty in global financial markets, the Indonesian rupiah has depreciated by about 8% against the US dollar, repeatedly hitting historic lows. The weakening of the exchange rate further increases the pressure of imported inflation, posing challenges to household consumption and enterprise production costs. In response, the Indonesian government has successively launched multiple measures. In May, Indonesia launched an economic stimulus package totaling 7.8 trillion Indonesian rupiahs, which boosted household consumption and residents' purchasing power through measures such as transportation subsidies. The Bank of Indonesia has stabilized the financial market by strengthening intervention in the foreign exchange market, expanding the application scope of the local currency settlement mechanism, and continuously raising interest rates. In May and June, the Bank of Indonesia raised its benchmark interest rate three times in a row, with a cumulative increase of 100 basis points to 5.75%. The economic stimulus plan launched this time for the second half of the year is a further extension and supplement of the Indonesian government's previous policy of stabilizing growth.
It is reported that this round of economic stimulus plan includes 8 policies, mainly divided into three pillars: consumption and business stimulus, employment support, and food aid. In the consumer and business sectors, the Indonesian government has focused on introducing transportation subsidies and creative industry support measures. During school holidays and Christmas/New Year periods, train, ferry, and domestic flights will offer discounted ticket prices, expected to benefit nearly ten million passengers; The royalty income tax rate for domestic authors has been uniformly reduced to 1.5% to support the development of the creative industry. In terms of employment, the government launched the second phase of the national internship program in July and expanded the scale of vocational training, focusing on helping college graduates, vocational high school graduates, and workers affected by layoffs to improve their skills and achieve employment.
In terms of stabilizing prices and ensuring people's livelihoods, food aid is the focus of this round of stimulus plans, with the relevant budget accounting for nearly 70% of the total scale of the stimulus plan. The Indonesian government will distribute rice aid from July to September, covering over 32 million people; Provide subsidies for soybeans to stabilize the prices of food for people's livelihoods. The Indonesian government has also introduced a series of industry support measures, such as providing zero import tariff preferences for liquefied petroleum gas, plastic raw materials, and aircraft parts, to cope with cost pressures brought about by international market fluctuations.
Denis Friawan, Senior Researcher at the Department of Economics at the Indonesian International Strategic Research Center, analyzed that Indonesia's economic fundamentals were good in the first quarter, with a growth rate of 5.61%. However, the increasing uncertainty in the external environment has put sustained pressure on the Indonesian economy, weakening the momentum of industrial growth. Future stimulus measures should not only focus on boosting consumption, but also strengthen supply side capacity building, and provide more solid support for long-term economic growth through creating employment, improving production capacity, and other means.