Societe Generale analysts Kunal Kundu and Galvin Chia say Indonesia’s early‑2026 fiscal deterioration is driven by front‑loaded expenditure, with the primary balance already in deficit and raising financing needs. They argue this mainly reinforces existing concerns rather than creating a new shock for FX, and they keep a bearish stance on the Indonesian currency while expecting some upward pressure on longer‑dated rates.

Fiscal risks reinforce bearish FX stance

"While the deficit data adds to long‑standing market concerns around the fiscal position, it is likely a less significant marginal driver for FX, which should primarily reflect risks around larger net oil & gas imports and a widening current account."

"The data should, however, marginally add to longer-end premia in rates, given the fiscal’s role in absorbing the inflationary shock."

"Fiscal execution will continue to be monitored closely, and we expect Indonesian authorities to remain cognisant of international investor perceptions."

"This data does not change our convictions: we maintain a bearish bias on FX and a bear‑flattening bias on rates."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)