Will Indonesia’s US$762 Million Ramadan Stimulus Be a ‘Positive’ Boost for the Economy?
•February 17, 2026
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Why It Matters
The stimulus targets Indonesia’s key consumption engine ahead of a critical growth quarter, yet its limited scope raises doubts about delivering the government’s 5‑6% GDP target. Understanding its effectiveness informs broader fiscal‑policy debates in emerging markets facing inflation and stagnant real incomes.
Key Takeaways
- •Transport fares cut by up to 30% during Ramadan
- •Food packages include 10 kg rice, 2 L cooking oil
- •Ticket sales reached 1.1 million, near full capacity
- •Economists expect only modest Q1 growth, below 5%
Pulse Analysis
Ramadan is Indonesia’s most lucrative retail window, driving a surge in household spending that typically accounts for a sizable share of the nation’s $1.5 trillion economy. By slashing train, sea‑ferry and domestic air fares and providing rice‑oil bundles to vulnerable families, the government hopes to offset inflationary pressures on staples such as beef and chilies. The timing aligns with the "mudik" home‑coming rush, a cultural tradition that fuels travel demand and retail sales, making the stimulus a targeted, seasonal demand‑stimulus rather than a structural reform.
Analysts, however, caution that the stimulus’ impact will be fleeting. While the 30% fare discount has already sold 1.1 million tickets, the benefit accrues mainly to middle‑class travelers who can still afford the trip. Low‑income households remain constrained by broader cost pressures, including rising food prices and stagnant real wages, limiting their ability to spend beyond basic necessities. Consequently, the boost to disposable income is expected to last only three to six weeks, insufficient to shift the first‑quarter growth trajectory significantly.
The broader implication for Indonesia’s fiscal strategy is clear: short‑term, consumption‑focused packages can cushion immediate demand but cannot replace sustained investment or structural reforms needed for long‑term growth. With the government targeting a 5‑6% GDP rise, the stimulus must be complemented by higher public spending and measures to stabilize real incomes. Observers will watch whether the modest uptick in Ramadan sales translates into a measurable contribution to Q1 GDP or merely serves as a temporary social safety net.
Will Indonesia’s US$762 million Ramadan stimulus be a ‘positive’ boost for the economy?
Indonesia tries to engineer Ramadan spending boost
Indonesia is trying to engineer a Ramadan spending boost, rolling out transport fare cuts and food handouts to shore up consumption during its busiest shopping season, but economists question how far the temporary support can go in lifting growth.
The 12.83 trillion rupiah (US$762 million) stimulus package unveiled ahead of the Muslim fasting month, which culminates in Eid ul‑Fitr, is meant to keep people travelling and shopping despite rising food prices and softer purchasing power.
In a statement on February 10, Coordinating Economic Affairs Minister Airlangga Hartarto said the package was meant to “increase mobility and maintain people’s purchasing power … to make a positive contribution to national economic growth”.
Officials have also cast the package explicitly as a bid to shore up early‑year growth momentum, with Hartarto saying, “Our target is to boost the economy because the first quarter is important.”
Airlangga Hartarto, Indonesia’s coordinating minister for economic affairs. Photo: Handout
Ramadan, which is expected to begin this week with Eid falling in late March, is typically Indonesia’s peak consumption period, marked by gatherings to break the fast, shopping for new clothes and the annual mudik home‑coming, when millions travel to their hometowns.
Household spending, the backbone of the US$1.5 trillion economy, reached 248.1 trillion rupiah during Ramadan last year, official data showed.
To support the festivities, Jakarta has allocated 911.16 billion rupiah to subsidise travel during selected dates next month, including 30 percent discounts on train and sea transport fares, a 100 percent discount on ferry services and up to 18 percent off domestic economy‑class air tickets between March 14 and 29.
The government will also implement a work‑from‑anywhere or flexible working arrangement for civil servants from March 16 to 27 to ease congestion during the home‑coming rush.
For poorer households, the government has prepared food packages containing 10 kg of rice and 2 litres of cooking oil.
Travellers have already lapped up the discounted fares. State‑owned railway operator Kereta Api Indonesia said last week that 1.1 million tickets had already been sold, out of 1.3 million available.
A vendor prepares meat at a flash market during the “Meugang” meat festival held to welcome the month of Ramadan, in Banda Aceh, Indonesia, on Monday. Photo: EPA
The back‑to‑back festivities of Lunar New Year and Ramadan have also pushed up demand for basic necessities, adding to inflationary pressure on staples such as beef and chillies.
A kilogram of beef currently costs about 140,000 rupiah (US$8.30), according to the National Food Agency, up from 130,000 rupiah a month ago. The Strategic Food Price Information Centre said national average prices of large red chillies last week recorded a 7.34 percent jump compared with the week before.
Rising prices have dampened consumers’ appetite ahead of Ramadan.
“In the past I bought 2‑3 kg of beef. Now I only buy a little, 1 kg is enough, so I have more money to buy cooking ingredients,” said Tini, a shopper at Kramat Jati market in Jakarta, as cited by Kompas on February 12.
“If possible, the price should go down, but during Ramadan it will definitely go up.”
Short‑term gain
The incentives could lift purchasing power at the margin, but the effects are likely to be short‑lived and insufficient to meaningfully boost growth, economists say.
“The stimulus is essentially seasonal demand support, not a structural growth driver,” Rizal Taufikurahman, an economist with the Institute for Development of Economics and Finance, told This Week in Asia.
“They effectively maintain consumption in the very short term by directly reducing the costs of mobility and basic necessities, resulting in a temporary increase in household disposable income. However, its impact is limited to a three‑to‑six‑week time horizon.”
A trader serves customers at Lam Dingin traditional market, ahead of Ramadan in Banda Aceh, Indonesia, on February 9. Photo: EPA
Yusuf Rendy Manilet, an economist with the Centre of Reform on Economics (Core) Indonesia, said last year’s Ramadan stimulus was more effective in lifting domestic spending, as it included electricity tariff discounts.
“Last year, electricity tariff discount was offered in January and February, just before Ramadan. The discount was quite helpful, considering that about 20 percent of people’s spending is allocated to paying electricity bills. Consumers then could allocate any excess funds to other needs,” Yusuf said.
Last year’s stimulus resulted in only 4.87 percent growth in the first quarter, however, as consumer spending was also affected by President Prabowo Subianto’s budget cuts across ministries and state institutions, Yusuf said.
“Government spending will also determine the success of this year’s Ramadan stimulus. Trends show that government spending typically slows in the first quarter, only picking up in subsequent quarters.”
Mohammad Faisal, also an economist with Core Indonesia, said the slashed transport fares would not be enough to persuade travellers to take on mudik, particularly low‑income families.
“Purchasing power among the low‑income class has not yet increased. Before deciding to go on mudik, they will not only consider transport costs but also other expenses related to Eid home‑coming, such as paying for accommodation and giving allowances to family and relatives,” he said.
Children hold torches during a parade to welcome the holy month of Ramadan at a residential area in Jakarta, Indonesia, on Sunday. Photo: EPA
Middle‑class travellers could forgo mudik for Eid if they had taken trips during the year‑end holiday and Lunar New Year, he added.
Analysts offered cautious estimates of first‑quarter growth, with Mohammad predicting it “will not reach 5 percent”, while Rizal gave a “moderate” range of 4.9 to 5.1 percent, in contrast to the Ministry of Finance’s target of up to 6 percent.
“The current sluggish purchasing power stems more from real income factors, not just inflation,” Rizal said. “Several indicators show that households are starting to curb spending, such as the proportion of income allocated to savings and debt payments is increasing, while consumption is declining.”
More informal jobs with low productivity also meant “unstable wages” for workers, he noted.
“This means that this stimulus is effective as social cushioning, but it is not strong enough to boost aggregate consumption among the middle class, which actually contributes most to gross domestic product,” Rizal said.
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