Jakarta. President Prabowo Subianto has set a series of economic assumptions and fiscal targets that will form the basis of Indonesia’s proposed 2027 state budget, including a 6% economic growth target, 2.5% inflation, and a budget deficit of 2.4% of gross domestic product.

The assumptions, unveiled in Prabowo’s Financial Note speech to parliament in Jakarta on Friday, set out the government’s economic outlook and spending priorities for next year.

“We do not choose between growth and prudence. We choose both. We do not choose between helping the people and maintaining the state budget. We do both,” Prabowo said in his speech to the House of Representatives on Friday in Jakarta.

Prabowo said the 2027 budget would be “expansive, collaborative, targeted and measurable” as his administration seeks to push growth higher while maintaining fiscal discipline.

Here are the key assumptions and targets underpinning the 2027 budget proposal.

1. Economic growth: 6%
The government is targeting economic growth of 6% in 2027, up from the 5.4% growth assumption in the 2026 state budget.

The government expects fiscal policies to support stronger economic activity and productivity while accelerating the shift toward higher-value-added sectors.

The target would represent a significant step up from Indonesia’s recent growth performance. The economy grew 5.29% year-on-year in the second quarter of 2026, according to official data.

For 2027, the International Monetary Fund forecasts growth of 5.1%, while the World Bank projects 5.2% and the OECD estimates 5%. These international projections are below the Indonesian government’s 6% growth target for 2027.

2. Inflation: 2.5%
The government expects inflation to be maintained at around 2.5% in 2027, in line with this year's target.

Indonesia's annual consumer price inflation stands at 2.88% for July 2026. This rate remains comfortably inside Bank Indonesia's official 2026 inflation target of 2.5% with a ±1% tolerance corridor (ranging from 1.5% to 3.5%)

3. 10-year government bond yield: 6.9%
The government has assumed a 6.9% yield on 10-year Indonesian government securities (SBN) for 2027.

The assumption is slightly below the current market yield. Indonesia’s 10-year government bond yield stood at 7.062% on Aug. 14, suggesting the government expects borrowing costs to ease somewhat in 2027. The yield spread over 10-year US Treasuries stood at 240.5 basis points, reflecting the additional return investors demand to hold Indonesian government debt.

4. Rupiah: Rp17,500 per US dollar
The government has based its 2027 budget on an exchange-rate assumption of Rp17,500 per US dollar.

The rupiah stood at Rp17,826 per US dollar at the close of Aug. 14, meaning the currency was about 1.9% weaker than the government’s 2027 budget assumption. Year to date, the rupiah has weakened by around 7%.

5. Oil price: $75 per barrel
The government has assumed an Indonesia Crude Price (ICP) of $75 per barrel for 2027.

It has also set oil and gas production targets. Oil lifting is projected at 610,000 barrels per day, while gas lifting is targeted at 954,000 barrels of oil equivalent per day.

The average international crude oil price has ranged between $81 and $87 per barrel year to date in 2026, depending on the benchmark. Prices have been highly volatile this year amid the conflict in the Middle East, including the war involving Iran, which triggered the closure of the Strait of Hormuz in the first half of the year before prices gradually eased in the third quarter.

6. State spending: Rp4,097.2 trillion
The government plans to spend Rp4,097.2 trillion ($230 billion) in 2027, up from Rp3,842.7 trillion allocated under the 2026 budget.

State revenue is projected at Rp3,426 trillion, compared with Rp3,153.6 trillion in the 2026 budget.

The government therefore plans Rp671.2 trillion in financing, resulting in a fiscal deficit equivalent to 2.4% of GDP.

That compares with planned financing of Rp689.1 trillion and a deficit of 2.68% of GDP under the 2026 budget.

Prabowo said the government would seek to reduce the deficit further, noting that Indonesia ultimately aspires to achieve a balanced budget.

7. Poverty: 6%-6.5%
The government is targeting a poverty rate of 6%-6.5% in 2027, compared with a target range of 6.5%-7.5% for 2026.

Prabowo said stronger economic growth and more effective use of the state budget would help reduce poverty.

The government plans to support the target through fiscal reforms, including improving state revenue collection, reducing revenue leakage and increasing spending efficiency.

According to the latest data from the Central Statistics Agency (BPS), Indonesia’s poverty rate stood at 8.07% in March 2026, down from 8.25% in September 2025, continuing a downward trend. The government’s 2027 target would therefore require a significant reduction from the current poverty rate.

8. Unemployment: 4.30%-4.87%
The government aims to reduce the open unemployment rate to 4.30%-4.87% in 2027, from a target range of 4.44%-4.96% in 2026.

The government sees stronger economic growth, productivity improvements and economic transformation as key to creating more employment opportunities.

According to the latest data from BPS, Indonesia’s open unemployment rate stood at 4.65% in May 2026, equivalent to 7.22 million people, down slightly from 4.68% in February 2026. The latest figure suggests the government’s 2027 target range is broadly in line with current unemployment levels.

9. Income inequality: Gini ratio of 0.362-0.367
The government is targeting an improvement in income inequality, measured by the Gini ratio, to between 0.362 and 0.367 in 2027.

That compares with a 2026 target range of 0.377-0.380. A lower Gini ratio indicates lower income inequality.

Prabowo also set a target of 0.575 for the Human Capital Index, with social protection and community empowerment programs expected to support the government's welfare objectives.

10. Eight national priorities

Beyond the macroeconomic assumptions, the 2027 budget will focus on eight National Priority Work Programs, or PKPN.

They are:

1. Food security

2. Energy and water independence

3. Education

4. Health

5. Downstream processing and industrialization

6. Infrastructure, housing and disaster resilience

7. Strengthening the people's economy and rural development

8. Poverty reduction

The government also plans to support these priorities through stronger defense and security, law enforcement, public-sector governance, digitalization and economic diplomacy.

Add as a preferred source on Google +