Wider fiscal deficit. The fiscal balance swung to a monthly deficit of IDR25.3tn in May from an IDR109tn surplus in April, resulting in a cumulative 5M25 deficit of IDR21tn (-0.09% of GDP) vs. IDR21.5tn deficit in 5M24 (0.09%). Government revenue contracted by 37.3% m-o-m to IDR184.8tn following a 47% surge in April, while spending rose to IDR210tn from IDR185.9tn in April, reflecting a 13% monthly expansion. Fiscal financing rose to IDR325tn in 5M25 from IDR279tn in 4M, reaching 52.7% of the target (5M24: 16.4%). As a result, excess financing (SILPA) rose to IDR303.8tn 5M25 from IDR284tn in 4M25.
Spending slightly rebounds. Central government spending rose by 10.3% m-o-m or -36.6% y-o-y, led by capital and material spending (Exhibit 1). The improvement in material spending reflects the higher budget release of IDR129tn as of 17 June vs IDR87tn in April and total efficiency of IDR300tn. Central government spending reached IDR694tn in 5M25 (25.7% of budget), down 15.8% y-o-y, reflecting high base effect from energy subsidy compensation last year which reached IDR65tn. Excluding energy subsidy compensation, total monthly spending drop narrowed to 9.2% y-o-y from -21.5% in April (Exhibit 2).
Social spending and free meal. Social spending increased to IDR5.2tn in May from IDR4.7tn in April, totaling IDR48.8tn in 5M25 (-30.7% y-o-y). This reflects the rollout of regular food aid and cash handouts which is set to be completed at the end of June. Spending on Free Nutritious Meal (MBG) only reached IDR4.4tn (3.8% of the IDR116tn budget) albeit up from IDR3.3tn in 4M. The MBG coverage reached 4.9mn recipients (5.9% of the 82.9mn target) through 1,716 central kitchens (5.5% of the total target). Monthly transfers to regions rose to IDR62.6tn from IDR52.3tn, led by revenue-sharing funds.
Tax collection normalized. Monthly government tax collections plunged by 41.9% m-o-m to IDR149tn after April s 61% surge during tax filing season. (Exhibit 3). In both monthly and cumulative annual basis, tax revenue contracted by less sharply. Cumulative tax revenue reached IDR806tn in 5M25, slightly improving to -7.3% y-o-y from 8.7% contraction in 4M.
Non-tax revenue remained weak. Monthly non-tax revenue moderated to IDR35.4tn from IDR37.4tn in April, led by lower oil and gas receipts. In both monthly and cumulative annual basis, non-tax revenue contracted by more sharply reflecting the absence of dividend payment which from this year diverted to Danantara. In 5M24, the government received IDR58.8tn of dividend payment from SOEs vs only IDR10.9tn 5M25 (Exhibit 4).
We maintain a higher fiscal deficit forecast for 2025. We maintained our 2025 budget deficit forecast at 2.8% of GDP, up from 2.3% in 2024 and above the 2.5% target. This reflects a potential substantial revenue shortfall, mainly due to the absence of SOE dividend and VAT hike cancelation. During the Q&A session, the Director General of Customs and Excise confirmed that the sugary drinks exercise will not be implemented this year, resulting in IDR3.8tn potential revenue loss (see Macro Trip: Key Takeaways from the Meeting with Customs and Excise Officials).
We continue to expect improved spending in 2H25. We continue to expect spending to accelerate in 2H, following the completion of 2025 budget reallocations. In addition, In June, the government allocated IDR49.4tn (0.2% of GDP) for the 13th salary bonus. Lastly, the disbursement of the new stimulus (see Policy Update: Further Details and Adjustments to the New Stimulus Plan and Exhibit 5), particularly handouts and wage subsidy, is set to start end of June till July. Finance Minister Sri Mulyani stated that the MoF will submit its 1H report and 2H budget outlook to Parliament in July.
