JAKARTA - The Center of Reform on Economics (CORE) Indonesia assesses that the government needs to accelerate the performance of the Inter-Agency Investment Management Agency to encourage investment in the energy sector, especially renewable energy in the midst of global energy crisis pressures.
Brief Report: Quarterly Economic Review Q1-2026 released by CORE in Jakarta, Wednesday, April 29, recommends that the momentum of the surge in energy prices due to the conflict in the Strait of Hormuz needs to be used to strengthen national energy resilience, including through accelerating the development of energy distribution infrastructure.
"The government can maximize the momentum of the energy crisis due to the Iranian war this time to accelerate the development of infrastructure to support the distribution of energy to the community," the report's recommendations said, quoted by Antara.
One of the things that is being encouraged is the acceleration of the development of household gas networks (jargas) as an alternative to reducing dependence on LPG imports. To date, the realization of new jargas connections has reached around 900 thousand households.
According to CORE, Indonesia has great investment potential in the upstream energy sector, but the development of the downstream sector is still lagging behind. For this reason, accelerating investment on the downstream side is considered important to strengthen domestic energy resilience.
In addition, Danantara is also considered to be able to play a strategic role in encouraging renewable energy investments, such as solar power plants (PLTS) which have great potential in Indonesia.
On the other hand, CORE noted that the escalation of the conflict between the United States, Israel, and Iran has pushed the world oil price to soar to 112 US dollars per barrel in the first quarter of 2026, far above the Indonesian crude oil price assumption (ICP) in the 2026 State Budget of 70 US dollars per barrel.
The increase immediately put pressure on the government's fiscal space. The Ministry of Finance recorded the realization of energy subsidies and compensation spending until February 2026 reached Rp51.5 trillion or an increase of 382.6 percent year-on-year.
External pressure is also reflected in the decline in foreign exchange reserves to US$151.9 billion in February, capital outflow of US$1.1 billion in March, and an increase in the yield of government securities (SBN) to 7.5 percent with a spread against US Treasury widening to 243 basis points.
In the CORE simulation, the state budget deficit has the potential to widen from the baseline of Rp689 trillion or 2.68 percent of GDP to Rp801 trillion if the oil price is in the range of 100 US dollars per barrel.
In fact, the deficit could increase to Rp914 trillion or 3.55 percent of GDP if the oil price remains at the level of 112 US dollars per barrel.
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