Indonesia sets out economic path for 2025
Country targets higher GDP growth, expansionary budget
Indonesia will target higher economic growth and an expansionary fiscal policy next year, government ministers said yesterday as they prepared the transition of key policies under a new president.
Southeast Asia’s largest economy is projected to grow between 5.3% and 5.6% in 2025 and is aiming for a fiscal deficit of 2.48% to 2.8% of gross domestic product (GDP), its planning minister Suharso Monoarfa said after attending a cabinet meeting to discuss next year’s economic assumptions and policies.
That compared with the 2024 GDP growth target of 5.2% and a fiscal deficit goal at 2.29% of GDP.
President Joko Widodo, who finishes his second and final term later this year, said the 2025 state budget proposal must adjust to the programmes of the new president and ensure continuity of the current and past administration’s work.
“Fiscal policy plans in 2025 is a bridge to ensure continuity and accommodate programmes of the incoming president,” Jokowi, as he is popularly known, said.
Defence Minister Prabowo Subianto and running mate Gibran Rakabuming Raka, Jokowi’s eldest son, declared victory in this month’s presidential election after a quick ballot count on Feb 14 showed they had won nearly 60% of votes. The official results will be announced by March 20.
Prabowo’s multi-billion-dollar free school lunch programme has been incorporated in the government’s calculation for its 2025’s
GDP growth and fiscal deficit estimates, Finance Minister Sri Mulyani Indrawati said.
Analyst have raised concerns that fiscal policy under Prabowo’s government will lead to a more expansionary fiscal stance and diverge from Indonesia’s long track record of conservative budgetary finances.
The programme is expected to cost up to 120 trillion rupiah (RM36.6 billion) in its initial stage and will increase to 450 trillion rupiah in 2029.
A Reuters report showed it may widen the
fiscal deficit by 0.33% of GDP in 2025.
Official data earlier this month showed Indonesia’s annual GDP rate fell slightly to 5.05% last year, from the 5.3% recorded in 2022, as falling commodity prices hit exports and tight monetary policy dampened demand.
The government has said it expects the growth rate to pick up to 5.2% in 2024, hoping spending for the election on Feb 14 and a return of private investment once political uncertainty eases will boost GDP. – Reuters