Indonesia Explores Measures to Mitigate Fiscal Pressure from Rising Oil Prices

Barclays economist Brian Tan reports that Indonesian policymakers are considering alternative measures to alleviate fiscal pressure from rising global oil prices before temporarily relaxing the fiscal deficit cap. According to Jin10, recent measures to restrict fuel usage aim to curb subsidy pressure and maintain the deficit below the statutory limit of 3% of GDP. Tan's baseline forecast anticipates a 30% increase in subsidized fuel prices in April to limit the fiscal deficit, although the timing of the price adjustment may be delayed. He adds that Indonesia's central bank may support economic stability in the short term, with expectations of two rate cuts by March 2027, each by 25 basis points, bringing the rate down to 4.25%.