Fiscal Expansion: From Direct Ball to Positioning Football
KBVS MACRO UPDATE
Wednesday, 24 September 2025
Transition of Fiscal Approaches: From Direct Ball to Positioning Football
Indonesia’s fiscal strategy in 2025 marks a notable shift from a shock-absorber approach—focused on short-term demand stabilization and likened to a direct play football style—towards a more pro-cyclical stance, emphasizing liquidity-driven development and job creation through a structured, or positioning football strategy.
This transition coincides with the leadership change at the Ministry of Finance, from Sri Mulyani to Purbaya Yudhi Sadewa. The move is viewed positively as it demonstrates the government’s capability to strengthen economic growth prospects. Additional liquidity measures and fiscal stimuli in the remainder of 2025 are expected to reduce concerns over the crowding-out effect, while also easing fears of capital flight triggered by lower government bond yields following BI’s rate cuts and their transmission into the fixed income market.
Nonetheless, risks persist. The pro-cyclical push, though promising for accelerating growth and employment, also raises fiscal vulnerabilities. A widening budget deficit and concerns over debt sustainability will test the government’s ability to deliver on its new strategy. Moreover, improvements in the labor market, investment activity, and household purchasing power will take time to materialize, underscoring the need for careful execution and monitoring.
Regards,
KBVS Research Team