Indonesia to Target 1.5-3.5% Inflation for Economic Growth

Indonesia aims to maintain inflation within a controlled range of 1.5 percent to 3.5 percent, a key strategy to bolster economic growth, according to Finance Minister Purbaya Yudhi Sadewa. This objective is being pursued through a coordinated approach involving fiscal and monetary policies designed to ensure supply and price stability, with a particular focus on essential goods like food and energy.

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Inflation will be controlled in the range of 1.5 percent to 3.5 percent, to support higher economic growth.

The government is actively monitoring and mitigating potential risks from imported inflation through ongoing collaboration with the central bank. Purbaya highlighted the continuous strengthening of synergy and coordination between central and regional governments and monetary authorities, managed by the central and regional inflation control teams. This ensures the effectiveness of inflation control measures and aligns fiscal and monetary policies to prevent adverse effects like crowding out, thereby safeguarding economic and financial market stability.

Looking ahead, Purbaya anticipates an improvement in the global economic landscape. He projects that the yield on 10-year government bonds will remain stable, fluctuating between 6.5 percent and 7.3 percent. This stability is crucial for supporting economic momentum amidst pressures on the rupiah's exchange rate.

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The government also continues to anticipate imported inflation risks through coordination with the central bank.

The Finance Minister also expressed optimism regarding geopolitical tensions, expecting the conflict between Iran and the US-Israel to subside, contributing to global economic recovery. Consequently, the Indonesian rupiah is forecast to remain stable against the US dollar, trading between Rp 16,800 and Rp 17,500 per dollar in 2027. With prudent and sustainable economic strategies, Indonesia's economy is projected to achieve robust growth of 5.8 percent to 6.5 percent in 2027, laying a foundation for achieving 8 percent growth in the medium term.

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Coordination between fiscal and monetary policy is continuously strengthened to ensure fiscal and monetary policies are aligned without causing a crowding out effect.