Fiscal deficit widened. Monthly government spending jumped 30.5% m-o-m to IDR358tn in October following a 6.7% contraction in September (see Appendix). Monthly revenue collection also picked up, though less sharply, by 10.5% to IDR248tn, an acceleration from the 6% expansion in September. As a result, the monthly fiscal deficit surged to IDR110tn from IDR50tn in September, implying a ytd fiscal deficit of IDR482tn or 2% of GDP (vs 1.4% last year). Net fiscal financing rose to IDR532tn in 10M25 from IDR458tn in 9M25 (80% of outlook). Excess financing (SILPA) fell to IDR50.7tn in 10M25 from IDR86tn in 9M25 (9M24: IDR78.4tn).
Stronger central spending. Central government spending picked up by 44% m-o-m, implying 32.6% y-o-y growth in October from -18.8% (Exhibit 1). The acceleration reflects strong spending on material (opex), social transfers, and subsidy compensation to Pertamina and PLN. The compensation was paid earlier in September last year, providing a low base effect. Excluding compensation, central government spending growth increased to 9.1% y-o-y from 3.5% (Exhibit 2). The pickup in material spending mainly reflects further budget releases to ministries and an acceleration of free meal programs. As of 10M25, the government spent a total of IDR32.7tn or 46% of the IDR71tn budget to cover 39.7mn recipients, equivalent to 48% of the target.
Social transfers doubled. October monthly social transfers doubled from September and from same period last year, suggesting the payment of regular cash handouts coinciding with the additional stimulus disbursement (see Policy Update: Government Expands Year-End Fiscal Stimulus Coverage). In 10M25, social transfers reached 95.6% of the MOF outlook, the item with the highest disbursement rate so far. The larger social transfers this year reflect budget redirection from slow-spent items, suggesting a more flexible fiscal regime under the new Finance Minister Purbaya.
Tax collection improved. Monthly tax revenue ticked up by 2.8% m-o-m to IDR191tn vs 8.6% in September, partly helped by lower tax refund. The cumulative tax collections are still 2.4% y-o-y lower in 10M25, reaching only 72% of outlook which suggests a likely shortfall for the full fiscal year. MOF reported that excise and international tax picked up 5.7% m-o-m or 11.2% y-o-y, partly reflecting enforcement against illegal cigarettes. MOF reported that enforcement actions against illegal cigarettes reached 954mn sticks, expanding to 41% y-o-y. The non-tax revenue expanded more sharply by 47% m-o-m from 4.5% contraction, but still reflecting 16% y-o-y contraction.
Fiscal deficit in 2025. We continue to forecast a fiscal deficit of 2.6% of GDP in 2025, below the 2.8% in the MOF outlook. However, the strong outturn in October suggests upside risks. The larger-than-usual deficit in October, in our view, also reflects less backloaded and better distributed spending given higher fiscal flexibility as shown in higher social transfers. This means the deficit in the last two months of the year should be lower than the historical average.
Further wider deficit in 2026. For 2026, we maintain our deficit forecast of 2.8% of GDP vs 2.7% in the original budget as we expect a large revenue shortfall and better spending execution (see 2026 Economic Outlook Turning Plans into Growth). The less backloaded spending should also be repeated next year given the more flexible fiscal regime. However, we expect lower-than-budgeted spending as the revenue shortfall forces budget cuts, helping to maintain the fiscal deficit below the 3% GDP legal limit.
