Indonesia seeks stronger growth by protecting purchasing power

The Indonesian government has set a target of achieving 6 percent economic growth in 2027,

Jakarta (ANTARA) - Maintaining people's purchasing power is a key priority for the Indonesian government as 2026 draws to a close, prompting economic policies that go beyond simply supporting consumer spending.

Looking ahead to 2027, the government is preparing sustainable policies designed to transform social assistance from a safety net into a driver of economic empowerment.

Coordinating Minister for Economic Affairs Airlangga Hartarto has announced several stimulus programs for the fourth quarter of 2026, including 10-kilogram rice assistance for 33.24 million beneficiaries and a monthly wage subsidy of Rp300,000 (around US$16.77) for 13.3 million workers.

The government is also preparing to open bank accounts for citizens aged 17 and above, with a focus on people living in poverty and those vulnerable to it.

Together, these three initiatives signal a shift toward combining social protection with broader financial inclusion. Looking ahead to 2027, the government's economic agenda will expand further.

The purchasing power cushion provided at the end of 2026 does not stand alone; it is designed to build momentum when linked with broader initiatives spanning employment, skills training, workers' protection, taxation, and housing.

In 2027, the government plans to continue its internship program for 150,000 participants and provide vocational training for 300,000 people. Together, these programs aim to address key labor market challenges, including unemployment.

Beyond supporting people facing economic pressures, the government also needs to strengthen their ability to compete in the job market by equipping them with skills that meet industry demands.

On the income front, the government is preparing an income tax reduction for workers earning less than Rp10 million (around US$559) per month, a measure expected to benefit approximately 7.5 million people. An adjustment to the tax-free income threshold is also on the agenda.

Tax policy is therefore being considered not only as a means of generating state revenue but also as a tool to support household spending. Under this policy package, allowing workers to retain more of their income is intended to boost disposable income and stimulate consumption.

Relief also extends to the housing sector. The government is preparing to expand its government-borne Value-Added Tax (VAT) incentive for housing, alongside a subsidized mortgage program offering a fixed interest rate of 6 percent.

The 6 percent fixed-rate mortgage is intended for fixed-income earners making up to Rp17 million per month who are purchasing homes priced at up to Rp500 million.

The measure would broaden access to homeownership for middle-income buyers whose monthly earnings exceed the Rp14 million income ceiling for the 5 percent interest rate under the Housing Financing Liquidity Facility (FLPP) scheme.

For households, homeownership meets a fundamental need while providing a foundation for long-term wealth building. For the wider economy, the housing sector is a key growth driver, stimulating demand across construction, building materials, finance, labor, and related supply chains.

Workforce protection

Worker protection is also part of the government's agenda. It is planning to extend workplace injury insurance and death benefits to informal workers, alongside adjustments to job loss insurance benefits.

These measures are intended to ensure that workers do not have to bear the financial burden of losing their income alone.

Taken together, these policies signal a strategic shift from cushioning immediate consumption toward strengthening people's long-term earning capacity.

While food assistance and wage subsidies provide short-term relief, vocational training, internships, tax incentives, housing support, and social security are intended to establish a more resilient foundation for future economic growth.

This approach aligns with the growth framework outlined by Airlangga ahead of the drafting of the 2027 economic agenda.

The Indonesian government has set a target of achieving 6 percent economic growth in 2027, identifying investment, higher productivity, human capital development, and value-added exports as key prerequisites.

Under this framework, citizens are not viewed merely as passive recipients of assistance. Instead, they are positioned as active contributors to national economic growth through employment, consumption, skills development, and productivity.

Data from Statistics Indonesia (BPS) shows that the economy grew 5.29 percent year-on-year in the second quarter of 2026. Inflation stood at 3.28 percent year-on-year in September, remaining within the national target range. Meanwhile, exports reached US$193.64 billion from January through August 2026, generating a trade surplus of US$7.25 billion.

In the manufacturing sector, Indonesia's Purchasing Managers' Index (PMI) returned to expansionary territory in September, reaching 52.4 after falling to 49.8 in August. The rebound provides a backdrop for the government to move beyond consumption support and focus on strengthening the production side of the economy.

Meanwhile, Bank Indonesia recorded year-on-year growth of 13.65 percent in bank lending in August 2026, driven by a 25.11 percent surge in investment loans. The expansion in investment financing aligns with government efforts to increase production capacity and capital investment.

Under the 2027 state budget, the government has earmarked Rp4,106.3 trillion in state spending and projected a budget deficit of 2.4 percent of GDP, alongside its 6 percent economic growth target.

Budget priorities include food, energy, education, healthcare, downstreaming and industrialization, infrastructure, housing, community-based economic development, and poverty reduction.

The stimulus package announced in late September forms part of a broader, long-term strategy.

The government is introducing protective measures to cushion the public against short-term pressures on purchasing power while laying the groundwork for stronger earnings, productivity, investment, and output over the longer term.

Achieving stronger growth requires better coordination among skilled workers, investing businesses, industries that generate added value, and markets capable of absorbing increased output.

Under this approach, economic support serves as a starting point rather than an end in itself. While policies introduced in late 2026 aim to safeguard households' economic stability, the 2027 agenda seeks to unlock broader economic momentum through higher productivity, stronger investment, and higher-value production.

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