Indonesia says economic growth could pick up next year, promises prudent budget
JAKARTA, May 20 (Reuters) - Indonesia's government sees economic growth reaching at least 5.2% next year as it continues to focus on improving food production, energy security and people's wellbeing, its finance minister told parliament on Tuesday.
Finance Minister Sri Mulyani Indrawati said economic growth in 2026 would be between 5.2% and 5.8% next year with the bottom end of the range the same as 2025's growth target.
"We will reach the target in 2026 by maintaining people's purchasing power... development of natural resources downstream industry and improving the investment climate, as well as human resources," Sri Mulyani said as she outlined the basis of the government's 2026 budget.
Still, some analysts were sceptical about the target growth range, saying the focus on welfare was unlikely to boost the economy.
"Still the same old story," Jahen Rezki, an analyst from the University of Indonesia, told Reuters. "Minimal or no economic policies we see so far that support development ... We need a lot of investment/financial deepening to be able to grow higher."
Spending for health and education in 2026 could be increased by as much as 4% and 5% year-on-year, respectively, Sri Mulyani said, as the government pushes ahead with President Prabowo Subianto's flagship programme of free meals for 83 million students and pregnant women, as well as to build hundreds of schools for poorer communities.
The 2026 budget will also focus on improving the defence sector by modernising military hardware and increasing the size of the reserve forces, Sri Mulyani told parliament.
Reiterating the government was committed to prudent spending, Sri Mulyani said the deficit would be between 2.48% and 2.53% of GDP, compared with this year's target of 2.53%.
Jakarta also assumed a weaker rupiah next year - up to 16,900 a dollar - as a consequence of the ongoing global market uncertainties from U.S. tariffs.
The budget will be the first by Prabowo, who wants to lift growth to 8% by 2029, since he took office in October. Indonesia usually formalises its spending plans by the end of the third quarter.
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