More stimulus details unveiled. On 15 September, the government unveiled a new stimulus package dubbed 8+4+5, totaling IDR21.5tn (0.12% of GDP), slightly below the June stimulus of IDR24tn. The package comprises three groups of initiatives: eight for the remainder of 2025, four extended to 2026, and five to enhance job absorption, bringing the total to 17 initiatives. During the Q&A, the finance minister emphasized that the new stimulus would have limited impact on the fiscal deficit, suggesting that some components have already been budgeted and that others represent a shift from unspent allocations. The new stimulus program will be disbursed from September 2025 to December 2026.
More targeted stimulus. Of total stimulus for the remainder of 2025 (IDR16.2tn or 0.1% of GDP), social assistance related programs received the largest allocation, totaling IDR12.5tn (0.05% of GDP). This includes food assistance of 10kg rice for 18.3mn households worth ~IDR383k per family for 2 months (IDR7tn) and cash-for-work for 600k beneficiaries providing ~IDR8.7mn per person for 4 months (IDR5.3tn) and a graduate internship program for 20k fresh graduates with benefits of ~IDR9.9mn per person (Exhibit 1). Overall, the latest stimulus is more targeted, offering higher benefits per recipient compared with the earlier wage subsidy (IDR600k for 10.7mn people) (see Policy Update: Further Details and Adjustments to the Stimulus Plan).
Stimulus for 2026. For 2026, the stimulus more focus on range of targeted taxes and social incentives, totaling IDR5.1tn or 0.02% of GDP. Except for tax incentives for labor-intensive industries, the 2026 stimulus largely extends measures from 2H25 (Exhibit 2). MSMEs will continue to enjoy the 0.5% final income tax relief. In the tourism and labor-intensive sectors, around 2.3mn workers will benefit from a full 12-month income tax (PPh 21) exemption for salaries up to IDR10mn per month, while non-wage workers potentially reaching 10mn individuals including potential expansion for farmers, traders, fishermen, and construction workers will receive contribution assistance for workplace accident and death insurance (JKK/JKM) with IDR76k benefit per person.
Job creation from flagship programs. The five initiatives to boost the job market are essentially the government accelerating the execution of flagship programs with a total potential job absorption of 3.6mn workers or 2.5% of total (Exhibit 3). This includes Merah Putih cooperatives (1.4mn jobs), people s plantations through large-scale replanting (1.6mn), and fisheries-related programs such as fishermen s villages, pond revitalization, and vessel modernization (0.6mn). This initiative suggests the government s concern over the job market despite the unemployment rate remaining low at 4.8% in Feb25.
Fiscal implications. We continue to expect a widening 2025 fiscal deficit of 2.8% of GDP, in line with the government s outlook. As we noted in our midyear outlook, we expected the government to accelerate spending in 2H along with the launch of new stimulus measures (see Midyear Economic Outlook: Hope Lies in Counter-Cyclical Policy). The still-large unspent budget has provided room for additional stimulus. This also suggests that concerns over growth linger within the government despite stronger GDP growth in 2Q. For 2026, we still expect a higher-than-budgeted deficit of 2.6% vs. 2.5% in the budget.
Growth impact. Despite a smaller total stimulus size in Sep-Dec, we believe this, combined with overall fiscal spending acceleration, policy rate cuts and liquidity support, will help support domestic demand. High-frequency economic indicators have shown improvement since June, although the gains have not been sustainable, partly reflecting a still-weak job market. With this recent stimulus, total social spending and ad-hoc program rose to IDR219tn in 2025 from IDR207tn originally, and IDR192tn in 2024 (Exhibit 4).
