The Indonesian government has rolled out an IDR 24.4 trillion fiscal stimulus package effective from 5 June to 31 July 2025, aimed at stabilizing household consumption during the mid-year school holiday season. The policy response came on the heels of a sub-5% GDP growth in Q1 2025, driven by weaker-than-expected household spending and delayed budget realization. 

The stimulus comprises five targeted programs across key sectors—transportation, social welfare, and labour market support (see Fig 1). A plan to include electricity tariff discounts for <1300 VA households was initially floated—mirroring the scheme used in Jan–Feb 2025—but was later scrapped due to limited inter-agency coordination. Importantly, the stimulus is fully funded without new debt issuance: resources come from non-priority expenditure reallocation, spending efficiency, and withdrawals from the Budget Surplus Fund (Saldo Anggaran Lebih/SAL), keeping the 2025 State Budget intact.

A Band-Aid Fix 

According to the Ministry of Finance, the package could help maintain GDP growth at circa 5% in Q2 2025, thanks to seasonal mobility, school holidays, and the Eid al-Adha period. Yet in practical terms, the stimulus is more likely to dampen the slowdown rather than drive a significant rebound in private consumption.

There are three main limitations. 

First, scale. Spread across roughly 39 million beneficiaries, the per-person benefit averages only around IDR 600,000–650,000 for the full two-month period—hardly sufficient to meaningfully boost spending power.

Second, execution risk. The short delivery window places pressure on bureaucratic capacity to target and distribute the assistance effectively. Any delay or inefficiency would dilute the impact, especially for sectors such as transport and accommodation, which are sensitive to both timing and volume of demand.

Third—and more fundamentally—the stimulus is a temporary fix to structural challenges. It may lift near-term consumption but will not address deeper drags on the middle class, such as labour market fragility, high informal employment, and stagnation / decline in the manufacturing sector. 

Fig 1. The June-July 2025 Stimulus Packages

Going forward, more attention must be directed to systemic reform. This includes:

• Reskilling and labour market programs
• Expanding unemployment protection mechanisms
• Formalizing the informal economy, particularly via streamlined licensing
• Revitalizing middle-class living standards—affordable housing, inclusive healthcare, access to education and credit

Without these, Indonesia risks patching symptoms while leaving the root causes of its growth constraints unaddressed.

Sound Fiscal Space, But Timely Disbursement Is Key

Despite the disbursement of the stimulus, Indonesia’s fiscal position remains well within safe bounds. The total size of the stimulus equals just 0.7% of the 2025 State Budget, highlighting the government’s cautious and calibrated approach to intervention. The package is fiscally neutral, as it is not backed by additional debt. 

As of June 2025, the fiscal deficit remains projected to be below 2.5% of GDP, and the debt-to-GDP ratio is under 40%, comfortably within fiscal prudence thresholds. Market appetite for government bonds remains strong. Foreign inflows to Indonesian government bonds reached around USD 1.7 billion in May, and the 10-year yield declined to 6.84% at the end of the month, down from the 6.9–7.0% range in March–April. Note that all three major rating agencies—Moody’s, S&P, and Fitch—have maintained Indonesia’s investment-grade rating, underscoring continued investor confidence.

Fig 2. % Realization of State Budget until May

However, the urgency to accelerate spending is apparent. As of end-May 2025, total budget realization stood at 28.1%, lower than the 33.8% average for the same period in 2021–2024 (see Fig 2). This shortfall indicates a backloading pattern in government disbursements, which the mid-year stimulus seeks to correct. But it also raises questions about administrative readiness under the new leadership. 

If Indonesia is to deliver on its pro-growth intent, addressing these implementation bottlenecks is as important as launching the right programs.