Indonesia has unveiled a 16.23 trillion rupiah (S$1.3 billion) stimulus package aimed at countering slowing economic growth and supporting households and businesses. The package, announced by Coordinating Minister for Economic Affairs Airlangga Hartarto, includes eight programmes focused on strengthening social protection, creating jobs, and accelerating growth in strategic sectors. The government also plans infrastructure projects that could provide temporary employment for over 600,000 people, with the goal of maintaining the country’s 5.2 per cent growth target for 2025.
The stimulus follows nationwide protests in late August, which called on President Prabowo Subianto to address rising economic pressures. Measures include income-tax exemptions for workers in labour-intensive sectors such as textiles, restaurants, and hospitality, while small businesses will continue to benefit from a 0.5 per cent tax rate until 2029, delaying the planned increase to 1 per cent. Additionally, seven trillion rupiah will be distributed to 18.3 million low-income households to provide 10 kilograms of rice each, alongside expanded social assistance for gig workers.
The government emphasized that the stimulus will complement structural reforms and encourage greater private-sector participation. Indonesia’s economy, which grew 5.12 per cent year-on-year in the second quarter, faces challenges from a 19 per cent US tariff imposed in August and weakening household consumption. To support growth, the government is injecting additional liquidity into the banking sector, redirecting around 200 trillion rupiah of idle state funds from Bank Indonesia to five state-owned banks.
Finance Minister Purbaya Yudhi Sadewa noted that these funds will be provided as loans, including through the Merah Putih Cooperative Fund, an initiative to stimulate economic activity in Indonesia’s outer regions. Analysts caution that the effectiveness of the liquidity injection will depend on whether banks use the funds to boost lending rather than simply expanding their balance sheets, with weak corporate and household demand potentially slowing credit growth.
