Mirae Asset: 2027 Draft State Budget Enters Optimization Phase, Execution Becomes Key to Growth

PT Mirae Asset Sekuritas Indonesia sees improving momentum in the domestic equity market amid investor focus on the government’s fiscal policy direction under the 2027 Draft State Budget (RAPBN). The Jakarta Composite Index (IHSG) rose 1.7% to 6,502, while the Rupiah strengthened to around Rp17,746 per US dollar, providing additional support for domestic sentiment.

Head of Research & Chief Economist of PT Mirae Asset Sekuritas Indonesia, Rully Arya Wisnubroto, said the quality of the IHSG rally is also improving as the index’s gains are no longer concentrated in a single stock. AMMN and BRMS have been the main contributors, supported by strong gold prices, while BBCA and BBRI have also provided additional support to the index.

“The IHSG momentum is improving, but rising global yields, yen volatility, and the potential unwinding of carry trades remain the key external risks,” said Rully.

Gold prices have remained around US$4,500 per troy ounce, supported by prospects of lower real yields, although inflation risks stemming from higher oil prices remain elevated. Meanwhile, yen intervention has prompted Japanese investors to increase their carry trade activities and purchases of overseas assets.

Against this backdrop, Mirae Asset Sekuritas Indonesia views the 2027 Draft State Budget (RAPBN) as signaling a shift in the government’s fiscal strategy from program expansion toward budget optimization. With fiscal space becoming more measured, the government’s key challenge going forward will be to ensure that every rupiah of budget spending generates a greater impact on economic growth.

The government is targeting a narrower fiscal deficit of Rp671.2 trillion, equivalent to 2.4% of Gross Domestic Product (GDP), as state revenues are projected to grow 8.6% year-on-year to Rp3,426 trillion, outpacing the 6.6% growth in expenditure to Rp4,097.2 trillion. At the same time, the government continues to target economic growth of 6% in 2027.

Fixed Income Analyst at PT Mirae Asset Sekuritas Indonesia, Jessica Tasijawa, said the fiscal challenge in 2027 will shift from capacity expansion toward spending effectiveness. This is reflected in the projected 1.4% contraction in the average budget growth of the 10 largest ministries and government agencies (K/L) in 2027, compared with 38.5% growth in 2026, while personnel spending is projected to decline by 34.8%.

“2027 will no longer be about increasing spending, but about making every rupiah work harder to generate higher growth,” said Jessica.

On the revenue side, tax revenues are targeted to reach Rp2,908 trillion, with income tax (PPh) projected to grow 9.9% and VAT and Luxury Goods Sales Tax (PPN/PPnBM) by 13.4%. Coretax, improved tax compliance, and domestic economic activity are expected to serve as the main drivers of revenue, reducing the government’s reliance on commodity windfalls.

On the expenditure and financing side, greater efficiency in the Free Nutritious Meals (MBG) program could create room for reallocation toward regional transfers and programs with higher economic multipliers. The budget for the National Nutrition Agency (BGN) is set to decline 10.4% to Rp240.2 trillion in 2027, while Mirae Asset estimates MBG realization in 2026 at around Rp168–192 trillion. Meanwhile, the government’s refinancing needs remain substantial, with approximately Rp878 trillion in government securities (SBN) maturities. Inflows from insurance companies and pension funds, estimated at around Rp143 trillion, could provide support for yields amid the potential increase in SBN supply.

Mirae Asset expects the 10-year SBN yield to remain in the range of 7.2%–7.5% in 2027. Substantial issuance needs, as well as Rupiah and geopolitical risks, are expected to limit the scope for further yield declines. However, if Rupiah stability provides Bank Indonesia with room to resume interest rate cuts, the 10-year SBN yield could potentially decline toward the 6.6%–6.9% range.

“The 2027 market story will hinge on fiscal effectiveness in sustaining growth and Rupiah stability, which will influence the direction of Bank Indonesia’s policy,” Jessica concluded.