Indonesia’s Fiscal Outlook 2025: Warning Signs Ahead as Budget Deficit Looms

Recent data released by the national legislature’s finance commission shows that state tax revenue up to April 2025 reached Rp 451.1 trillion, marking a 27.73% year-on-year decline. This drop is largely attributed to a slowdown in domestic consumption and investment—key engines of economic activity that directly feed into tax collections.

In contrast to 2024, which saw a budget surplus in the first quarter, the 2025 state budget has been recording monthly deficits since January. By the end of March 2025, the cumulative fiscal deficit had already reached Rp 104.2 trillion, equivalent to 0.43% of GDP. This stands in stark contrast to the same period last year when the budget recorded a surplus of over Rp 8 trillion.

The 2025 national budget has set a full-year deficit ceiling of Rp 616.2 trillion, or 2.53% of GDP. However, if revenue collection continues to lag while government spending remains high, analysts warn that the fiscal deficit may breach the legal limit of 3% of GDP, raising serious concerns about sustainability and market confidence.

While Indonesia's fiscal system has shown resilience in past crises, the sharp decline in tax revenue and the persistent budget shortfalls point to a critical inflection point. Without strategic adjustments—either through boosting revenue or recalibrating expenditure—the country could face heightened fiscal risks in the months ahead.

Stay informed with SSA as we continue to monitor Indonesia’s economic direction. For businesses and investors, now is the time to reassess your strategies in light of the shifting fiscal landscape.

Satra Sinar Abadi Group

As economic activity continues to lose momentum into the first quarter of 2025—and likely into the second—Indonesia’s state revenue is struggling to keep pace. The latest figures show a sharp decline in tax income, triggering alarms about the country's fiscal health. For businesses, investors, and policymakers alike, this could signal a season of tighter government spending and a potential shift in economic strategy.