Indonesia Rupiah: Fiscal discipline supports stability – UOB

UOB economist Enrico Tanuwidjaja has analyzed Indonesia's 2027 State Budget, pointing out a balanced approach between economic growth and fiscal responsibility that affects the value of the Indonesian Rupiah and local bonds. This budget predicts a Rupiah exchange rate of Rp17,500 per US$, a 6.0% GDP growth target, and a 2.40% deficit of GDP, funded through disciplined sovereign bond issuance.

Economic growth of 6.0% is expected, driven by strategic public investments and careful fiscal management, with the fiscal deficit expected to decrease to 2.40% of GDP. The Rupiah exchange rate of Rp17,500/US$ demonstrates the impact of global market volatility and the strength of the US dollar. The 10-year Government Bond (SBN) yield is projected at 6.90%, assuming stable domestic liquidity conditions and reasonable sovereign risk premiums.

If the US maintains high interest rates or the dollar strengthens, it could put more strain on the rupiah and raise the cost of government borrowing, requiring close collaboration between fiscal authorities and Bank Indonesia. The financing for this budget will come from a disciplined mix of domestic and international sovereign bond issuance, which will help maintain market confidence and funding flexibility.