What's happened
Indonesia's government plans a 10% revenue increase for 2026, targeting 3,148 trillion rupiah, with a focus on expanding tax compliance and social programs. President Prabowo emphasizes fiscal discipline and diplomatic efforts, including trade agreements with Peru and the EU, amid tourism and economic challenges.
What's behind the headline?
Indonesia's economic strategy will face significant hurdles in meeting its revenue targets, especially given declining global demand for key commodities like palm oil and coal. The government’s focus on expanding the tax base and improving compliance is crucial, but the ambitious 13.5% increase in tax revenue relies heavily on global economic stability. Prabowo’s emphasis on social programs, such as the free nutritious meals initiative, demonstrates a commitment to long-term human development, yet the program's implementation issues and budget transparency concerns could undermine its effectiveness. Diplomatic efforts, including trade agreements with Peru and the EU, are strategic moves to diversify Indonesia’s export markets, especially as exports of commodities weaken. Bali’s overtourism and cultural sensitivities remain unresolved, with recent incidents overflights near sacred sites exposing the need for better regulation and infrastructure investment. Overall, Indonesia’s balancing act between fiscal discipline, social investment, and regional diplomacy will determine its economic resilience in 2026, but global uncertainties and domestic infrastructure gaps pose real risks to its ambitions.
What the papers say
The South China Morning Post highlights Indonesia’s cautious growth target of 5.4% for 2026, emphasizing Prabowo’s focus on social programs and diplomatic ties, including recent trade agreements with Peru and the EU. Bloomberg reports on the government’s revenue goal of 3,148 trillion rupiah, relying on a sharp increase in tax collection through compliance and expansion of the tax base, amid declining commodity prices. Both sources underscore Indonesia’s strategic efforts to diversify its economy and strengthen regional ties, but also acknowledge the challenges posed by global economic uncertainty and domestic infrastructure issues. The South China Morning Post provides detailed insights into Prabowo’s domestic policies and diplomatic initiatives, while Bloomberg emphasizes fiscal targets and trade negotiations, illustrating a comprehensive picture of Indonesia’s economic and diplomatic landscape as of August 2025.
How we got here
Indonesia's 2025 budget focused on social programs, infrastructure, and diplomatic engagement. Prabowo's administration aims to sustain economic growth amid global uncertainty, with initiatives like the free nutritious meals program and efforts to diversify tourism beyond Bali. Trade negotiations with Peru and the EU are part of broader regional integration strategies, while domestic challenges include tourism overcapacity and infrastructure gaps.
Go deeper
Common question
-
How is Indonesia boosting its economy and diplomacy in 2025?
Indonesia is making significant moves in 2025 to strengthen its economy and diplomatic relations. From new trade agreements to social spending, the country is balancing growth with cultural preservation. Curious about Indonesia's latest economic strategies and diplomatic efforts? Below are answers to common questions about Indonesia's current economic and diplomatic landscape.
-
Why Are UK Borrowing Costs Rising Now?
UK borrowing costs are climbing, raising questions about the country's economic stability and fiscal policies. Investors and policymakers are watching closely as bond yields increase, reflecting concerns over inflation, government debt, and political debates around taxation. Understanding why these costs are rising can help you grasp the broader economic picture and what it might mean for your finances and investments. Below, we explore the key reasons behind this trend and what it could signal for the future.
-
What Are Indonesia's Plans for Economic Growth and Cultural Diplomacy?
Indonesia is actively working to boost its economy and strengthen its cultural ties worldwide. With ambitious targets for increased revenue and new trade agreements, the country aims to position itself as a key player on the global stage. But what does this mean for visitors, local communities, and Indonesia's cultural heritage? Below, we explore Indonesia's strategic plans, the challenges it faces, and what travelers should know about respecting local sensitivities while enjoying its rich culture.
More on these topics
-
Prabowo Subianto Djojohadikusumo is an Indonesian politician, businessman and former Army lieutenant General who is the currently-appointed Minister of Defence of the Republic of Indonesia.
-
Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania, between the Indian and Pacific oceans. It consists of more than seventeen thousand islands, including Sumatra, Java, Borneo, Sulawesi, and New Guinea. Indonesia i
-
Dina Ercilia Boluarte Zegarra is a Peruvian lawyer and politician who is the current Vice President of Peru since 2021. She has been a RENIEC official since 2007.
-
Donald John Trump is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021.