Indonesia unveils 26.34 trillion rupiah stimulus to offset external shocks and rupiah slide

[JAKARTA] Indonesia will roll out a 26.34 trillion rupiah (S$1.88 billion) economic stimulus package in the second half of 2026, as the government steps up efforts to support household spending and cushion industries from rising raw material costs.

The package comes as policymakers face rising external uncertainty, including geopolitical tensions in the Middle East and pressure on the rupiah. These factors have heightened concerns over supply chain disruptions and imported inflation in South-east Asia’s biggest economy.

A central feature of the package is trade and industry support through 0 per cent import tariffs on liquefied petroleum gas (LPG) and plastic raw materials.

Airlangga Hartarto, the coordinating economic minister, on Monday (Jun 22) said that the measures are aimed to ease supply disruptions in the petrochemical chain, stabilise input costs, and help cushion inflation pressures in consumer goods, particularly packaged food products.

“We continue to monitor developments in the Middle East. Indonesia must safeguard its domestic economy and take anticipatory steps against external risks,” he noted, adding that the stimulus package follows directives from President Prabowo Subianto.

The government said that LPG is a critical input for the petrochemical industry, while lower-cost plastic raw materials are expected to help stabilise production costs across manufacturing sectors that have been affected by volatile global prices and currency weakness.

The Iran conflict has disrupted global petrochemical supply chains, affecting Indonesia, which is a major importer of petrochemical products. Domestic producers currently meet only around 30 per cent of total downstream demand, leaving the rest dependent on imports.

In March, the country’s largest petrochemical producer, Chandra Asri, declared force majeure due to supply chain disruptions and raw material shortages. It lifted the declaration in May as conditions gradually stabilised.

On the demand side, the stimulus includes transport subsidies of up to 30 per cent on fares during the school holiday period and the year-end festive season. The move is aimed at encouraging mobility and supporting household consumption.

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The government will also extend food assistance for 33.24 million beneficiaries from July to September, with a budget of 17.54 trillion rupiah.

Another key measure is a soya bean price stabilisation programme aimed at supporting tofu and tempeh producers amid persistent pressure on food input costs. Indonesia’s annual soya bean demand stands at around 2.5 million tonnes, most of which is met through imports.

The rupiah has weakened by nearly 7 per cent year to date, reflecting a mix of external pressures and softer investor sentiment, with some concerns linked to policy uncertainty under Prabowo’s administration.

The currency’s depreciation has heightened risks of imported inflation, particularly for energy and raw materials, given Indonesia’s continued reliance on global supply chains for key inputs.

In response, Bank Indonesia raised its benchmark interest rate by 50 basis points this month, aiming to anchor expectations, attract capital inflows, and help stabilise the rupiah amid sustained external volatility.

Airlangga said that the government will continue to coordinate closely with the central bank and the finance ministry to maintain macroeconomic stability, control inflation and sustain domestic demand.