IDX Reaches New All-Time High After BI’s Surprise Rate Cut
 
The Indonesia Stock Exchange (IDX) Composite Index hit a new all-time high this week, with analysts expecting the rally to continue following Bank Indonesia’s (BI) fifth rate cut of the year.  

The benchmark index closed Wednesday up 0.85 percent at 8,025.17 points, setting a fresh record and pushing market capitalization to an unprecedented Rp 14.5 quadrillion (USD880.8 billion).  

The rally carried into Thursday’s opening session, with the IDX Composite climbing another 0.5 percent to 8,065.74 points before slipping to close 0.21 percent lower at 8,008.43 points.  

Local brokerage Samuel Sekuritas stated in a note on Thursday that it expected the index to “move higher” on the back of positive sentiment following the benchmark rate cut.  

BRI Danareksa Sekuritas likewise attributed the index’s new record to the central bank’s unexpected decision to lower interest rates, complemented by the United States Federal Reserve’s first rate cut of the year by 25 basis points (bps).  

BI Governor Perry Warjiyo announced on Wednesday that the BI Rate was cut by 25 basis points to 4.75 percent, its lowest level since October 2022.  

The surprise move caught most analysts off guard, as the majority had expected BI to pause after back-to-back cuts in the previous two months. The timing added to the drama, coming just hours ahead of the Fed’s closely watched rate decision. 

A report from Kiwoom Sekuritas on Thursday also highlighted that the rate cut, aimed at strengthening Indonesia’s pro-growth stance, was in line with the global shift toward monetary easing. This move, coupled with the government’s newly announced fiscal stimulus, is expected to bolster domestic consumption, micro, small and medium enterprises (MSMEs), infrastructure projects and the tourism industry, among other sectors.  

“This move serves as a buffer for the IDX Composite amid external headwinds caused by global tariffs and divergent monetary policies worldwide,” the report stated.  

Kiwoom projected the IDX Composite would hit the 8,300 mark by year-end, supported by anticipated economic growth fueled by the government’s stimulus package.  

On Monday, Coordinating Economy Minister Airlangga Hartarto unveiled an Rp 16.2 trillion stimulus program designed to create jobs and sustain household spending.  

The government introduced several initiatives, including an internship program for fresh graduates and extended income tax relief for employees in the tourism sector. The internship program aims to “link and match” new graduates with industries, with its first phase targeting 20,000 participants over a six-month period.  

The income tax waiver, previously applied to labor-intensive industries, will now be extended to the tourism sector, including hotels, restaurants and cafes. Additionally, the government allocated IDR 7 trillion to continue food aid distribution through November. 

The IDX Composite previously hit new all-time highs in late August, reaching 8,022.76 points and recording a record market capitalization of IDR 14.4 quadrillion. The Financial Services Authority (OJK) attributed this milestone to the country’s stronger economic fundamentals and an improved outlook for the global financial market.  

As of Wednesday, the IDX Composite has gained 13.35 percent year-to-date, ranking third in Southeast Asia behind Singapore’s Straits Times Index (14.16 percent) and Vietnam’s VN-Index (33.01 percent), while outperforming Malaysia, the Philippines and Thailand, all of which remain in negative territory. 
 
 
Source: Jakarta Post

Indonesia Parliament Set to Approve Bigger 2026 Budget for Prabowo 

Indonesia's parliament moved a step closer on Thursday to approving an even bigger spending allocation and a wider fiscal deficit forecast for President Prabowo Subianto than he had sought for the 2026 budget. 

Anti-government protests that began in August have unsettled financial markets, leaving investors watching Indonesia's fiscal plans for signs of weakening discipline after respected finance minister Sri Mulyani Indrawati was sacked last week. 

A parliamentary fiscal oversight panel approved a total spending plan of IDR 3,842.7 trillion (USD 233 billion) in the 2026 budget, with the fiscal deficit forecast at 2.68%, Said Abdullah, its chair, said. 

That figure is IDR 56.2 trillion higher than Prabowo's August proposal to parliament, and about 9% higher than estimated total spending for 2025. 

The budget deficit in Southeast Asia's largest economy is forecast at 2.78% of GDP this year, below a threshold of 3% set by law. 

The panel's revenue target of IDR 3,153.6 trillion is up 5.9 trillion over the original proposal and about 10% bigger than estimated revenues in 2025. 

A wider parliamentary vote is expected on Sept. 23. Parliament, overwhelmingly controlled by Prabowo's coalition, usually passes the panel's endorsement. 

Sri Mulyani had prepared Prabowo's original budget proposal. 

The wider deficit plan was fine, said new finance minister Purbaya Yudhi Sadewa, adding, "It's still below 3% (of GDP) and is needed to create higher economic growth. Don't worry, we will be prudent." 

Prabowo has set a GDP growth target of 5.4% for 2026, aiming for a rate of 8% within his five-year term, which runs until 2029. 

The government is seizing the chance to pursue policies that drive growth with the wider fiscal gap as the U.S. Federal Reserve looks likely to maintain an accommodative stance until the first half of 2026, said Victor Matindas, an economist with one of Indonesia's biggest banks, BCA. 

Indonesia must find ways to increase revenues from non-tax sources, rather than relying on bonds issuance to plug the widening budget gap, said Telisa Falianty, an economist with the University of Indonesia. 

REGIONAL TRANSFERS INCREASED 

Although the budget allocation for regional governments has been increased to IDR 693 trillion from the original 650 trillion, it is still about a fifth less than regional transfers in 2025. 

Regional leaders had complained that Prabowo's original proposal would lead to increases in land and building taxes to cover the shortfall. 

The concession was meant to maintain social and political stability at local levels, Purbaya said, promising spending by Jakarta on development programmes nationwide to make up for the smaller transfers. 

There was no immediate breakdown of the changes, but senior finance ministry official Febrio Kacaribu said the budget for Prabowo's priority spending was unchanged. 

The allocation for a flagship programme of free meals for students and pregnant women is IDR 335 trillion, while defence spending is 335.3 trillion in the original proposal. 

(USD 1= IDR 16,505) 

Source: Reuters 

Indonesia Itches to Negotiate Trade Pact with Mercosur as Talks Stall

Indonesia is itching to start the first round of negotiations with the Brazil-led Mercosur as the talks remain in limbo for years. 

Mercosur brings together Brazil, Argentina, Paraguay, Uruguay, and its most recent member Bolivia. In late 2021, Indonesia agreed to negotiate a trade pact with the South American bloc. Both sides even met to discuss the negotiation framework a few months later. Almost four years have passed, but the first round of the agreement has yet to come to fruition. 

Trade Minister Budi Santoso recently nudged Uruguay into beginning the negotiations when its deputy foreign minister, Valeria Csukasi, visited Jakarta. 

“Indonesia emphasizes the importance of strengthening trade ties with Uruguay and Mercosur as a joint effort towards a mutually beneficial trade agreement," Budi told Csukasi, as quoted by a ministerial statement. 

Jakarta also blamed the sluggish negotiations on Mercosur members having “internal differences on international trade priorities”, without going into more details. 

According to the press statement, Csukasi responded by saying that an Indonesia-Uruguay cooperation could be one way to boost trade if the Mercosur negotiations could not begin. 

A foreign ministry official later told The Jakarta Globe that efforts to initiate negotiations are underway. 

"We are currently discussing the negotiation plan for the first round. We are still in the early stages of drafting the terms of reference, including whether the agreement will be incremental or not,” Epiphania Riris Wusananingdyah, a director at the Foreign Ministry, told a news conference on Thursday. 

When Brazil's President Lula da Silva hosted Prabowo Subianto in Brasilia a few months ago, they agreed to explore a Mercosur-Indonesia trade accord. The leaders were open to a comprehensive economic partnership agreement or CEPA-level pact, meaning that it would likely cover business cooperation beyond goods trade.  

Countries may choose to negotiate the terms in phases, starting with tariff cuts in goods trade before it eventually expands to scrapping barriers related to trade in services and investment. This is what Epiphania meant by "incremental". 

Brazil is the Mercosur member with whom Indonesia mainly does business, as bilateral trade topped USD 7.1 billion in 2024. But the partnership sees Indonesia mostly importing Brazilian goods, causing a trade gap of nearly USD 3.7 billion that year. Indonesia’s trade with Uruguay reached only $65.9 million last year, but the Southeast Asian economy enjoyed a USD 33.7 million surplus, official statistics showed. Estimates by the Indonesian trade office placed Mercosur’s combined gross domestic product (GDP) at around USD 2.6 trillion as of 2023. 

In 2023, senior Indonesian diplomat Nidya Kartikasari admitted that Mercosur wished to postpone the talks until it took care of its overdue pact with the European Union (EU), which dates back 25 years ago. Nidya also told the Globe that Uruguay's interest in a separate trade bloc, the CPTPP, had caused discord within Mercosur. 

Fast forward to early September 2025, the European Commission finally proposed the Mercosur pact for ratification, but the document needs the consent of 15 of 27 members. Bolivia had only officially joined Mercosur in 2024, hence excluded from the EU pact. 

Source: Jakarta Globe