Jakarta. Indonesian stocks rallied 1.59% on Friday as investors digested President Prabowo Subianto’s 2027 budget proposal, which targets faster economic growth while keeping the fiscal deficit below the 3% legal threshold.

Jakarta Composite Index (JCI) gained 100 points to close at 6,401. A total of 354 stocks rose, while 277 declined and 332 were unchanged. Total trading value reached Rp 12.4 trillion ($696.1 million).

Prabowo laid out a set of key macroeconomic assumptions in the 2027 budget, including projected economic growth of 6%, inflation at 2.5%, a rupiah exchange rate of Rp 17,500 per US dollar, and a 10-year government bond yield of 6.9%. The government also set a target for a narrower fiscal deficit of 2.40% of GDP, down from 2.68% in the 2026 budget.

“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.

The government is proposing Rp 4,097.2 trillion in spending for 2027, while state revenue is expected to reach Rp 3,426 trillion. The proposed deficit is the narrowest since 2024 and remains below the government’s legal ceiling of 3% of GDP.

The budget speech drew particular attention from investors as the government’s fiscal direction remains a key domestic market catalyst amid uncertainty over Indonesia’s economic outlook.

Pilarmas Investindo Sekuritas said the JCI’s movement on Friday was influenced by a combination of domestic and external factors. Domestically, investors were primarily focused on the government’s policy direction outlined in the 2027 Financial Note and State Budget proposal.

“Market participants are looking at the government’s commitment to fiscal discipline, including efforts to keep the budget deficit below 3% of gross domestic product (GDP),” Pilarmas said in a research note Friday.

“Investors are also looking at the source of commodity export revenues from the new entity established by the government. Clarity on this policy is important because it can provide an indication of the government’s strategy to maintain state revenues and economic resilience,” the brokerage added.

Prabowo also pledged to improve spending efficiency, saying government procurement could generate savings of up to Rp 360 trillion if consolidation, electronic catalogs and data-based planning were implemented broadly.

Separately, he announced plans to operationalize a Mineral and Strategic Commodities Exchange on Jan. 1, 2027, aimed at establishing Indonesian reference prices for key export commodities.

“We are not only trying to become a producer of global commodities. We must become a price setter for global commodities,” Prabowo said.

On the external front, Pilarmas said positive sentiment came from softer US producer inflation. The US Producer Price Index (PPI) for final demand was unchanged month-on-month after previously declining 0.1%, while the annual rate fell to 4.7% from 5.5%.

The data, combined with a slowdown in US consumer inflation, strengthened expectations that the Federal Reserve has room to keep interest rates unchanged at its September meeting. According to CME FedWatch, the probability of the Fed maintaining its current rate in September stood at 65.2%.

“These expectations have become a positive catalyst for risk assets as they ease concerns over tighter US monetary policy,” Pilarmas said.

Still, the brokerage cautioned that global sentiment has not fully stabilized. The struggle between the US and Iran over the Strait of Hormuz remains a concern for markets, potentially increasing uncertainty over energy supplies and global trade.

US Treasury Secretary Scott Bessent has also warned of potentially tougher economic measures against Iran. The situation has kept investors in a wait-and-see stance as they monitor diplomatic developments surrounding the Strait of Hormuz.

Across regional markets, Japan’s Nikkei 225 advanced 0.6%, while South Korea’s Kospi climbed 2.4%. Hong Kong’s Hang Seng Index fell 1.1%, while the Shanghai Composite was little changed at 3,927.

On Wall Street, the S&P 500 rose 0.7% on Thursday to close at a record 7,798. The Dow Jones Industrial Average gained 0.1% to 53,839, while the Nasdaq Composite advanced 0.8% to 26,803.

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