President Joko Widodo set Indonesia's economic growth figure in the 2025 Draft State Budget (RAPBN) at 5.2 percent. The target is considered quite realistic by some circles considering that the country's economy slowed by 5.05 percent in the second quarter.
When delivering a speech on the Financial Note, at the MPR/DPR RI Building, Jakarta, Friday (16/8), Jokowi said this target was chosen considering the global economic conditions that are still relatively stagnant. He emphasized that the country's economic growth next year will still rely on domestic demand.
“People's purchasing power will be strictly maintained by controlling inflation, creating jobs, and supporting social assistance and subsidy programs,” said Jokowi.
The government, said Jokowi, will also strive to increase high value-added products, export-oriented, which are of course supported by competitive fiscal incentives while maintaining fiscal sustainability.
Keep the Inflation Target in the 2.5% Range
The inflation target in the 2025 RPABN, Jokowi continued, will remain within the range of 2.5 percent. In addition, the Rupiah exchange rate is estimated to be in the range of Rp16,100 per US dollar and the interest rate on 10-year Government Securities (SBN) is in the range of 7.1 percent.
Indonesian crude oil prices (Indonesian Crude Oil Price/ICP), he said, is estimated to be at $82 per barrel, and oil lifting is expected to reach 600 thousand barrels per day, and natural gas to reach 1.0005 million barrels of oil equivalent per day.
Meanwhile, state revenue in 2025 is set at IDR 2,996.9 trillion, consisting of tax revenue of IDR 2,490.9 trillion and Non-Tax State Revenue (PNBP) of IDR 505.4 trillion while maintaining the investment climate and environmental sustainability as well as the affordability of public services.
In order to achieve the state revenue target, Jokowi said the incoming government will continue tax reform by expanding the tax base and increasing taxpayer compliance, improving tax governance and administration, and providing targeted and measurable tax incentives.
“State spending is planned at Rp3,613.1 trillion, consisting of Central Government spending of Rp2,693.2 trillion, and Transfers to Regions,” he said.
The budget deficit in 2025, he added, is planned to be 2.53 percent of gross domestic product (GDP) or IDR 616.2 trillion, which will be financed by utilizing safe and carefully managed financing sources.
President: 2025 State Budget Must Be Designed Flexibly
The former governor of DKI Jakarta emphasized that the design of spending and revenue as well as financing in next year's budget must be designed flexibly, while still providing fiscal space to anticipate uncertainty and support sustainable development in the transition of government.
“The 2025 State Budget is designed to maintain Stability, Inclusivity, and Sustainability to improve welfare and equality through inclusive and sustainable economic growth,” he explained.
Jokowi, on this occasion, had the opportunity to mention one of the flagship programs of President-elect Prabowo Subianto, namely Free Nutritious Meals, which he said would be directed at improving children's nutrition while empowering Micro, Small and Medium Enterprises (MSMEs), and improving the economy of small communities in the regions.
“The Free Nutritious Meal Program is carried out in stages, aligned with technical and institutional readiness, as well as accountable governance,” he said.
Economist: Government Targets Realistic
CORE Indonesia economist Yusuf Rendy assessed that the target set by the government in the 2025 RAPBN of 5.2 percent is quite realistic. According to him, the government often conveys the upper limit of national economic growth in the range of 5.5 percent.
“Assuming a one-year difference, I think it is important to adjust the economic growth target so that it is not much different from the estimated economic growth throughout 2024,” Yusuf said in a written message to VOA.
On the other hand, Yusuf sees the difference or target of economic growth of 5.2 percent, showing that the government is trying to be realistic in seeing how the economy can grow in a one-year difference with various challenges seen until mid-2024.
Yusuf also highlighted the budget deficit target set at 2.53 percent of Gross Domestic Product (GDP), which he said was also moderated considering that previously there was an issue circulating that the upper limit of the APBN deficit target could reach 2.8 percent.
He explained that the adjustment of these targets was necessary considering the issue of fiscal discipline had become a public concern. In addition, Yusuf assessed that the 2.53 percent deficit target showed that the current government was trying to accommodate the spending needs of the new government. At the same time, it also continued to pay attention to the principle of fiscal discipline in managing the APBN in the medium and long term.
Furthermore, Yusuf said that accelerating economic growth would be one of the homework assignments that would be passed on from the current government to the new government.
He stressed that the new government must find a way to ensure that the short-term economic growth acceleration target can be achieved. This is very important considering that in 10 years of Jokowi's leadership the relatively high economic growth target was not achieved.
“So I think the 2025 State Budget will also be used to accelerate economic growth, either to pursue the 5.2 percent target or even in the medium term above that figure,” he said.
Yusuf added that efforts to reduce poverty levels are also one of the very important homework of the new government. According to him, data improvement must be done to be right on target.
“Moreover, this data is also related to the use intended for new programs. Later, data from social assistance. Of course, it will also correlate with the data used for these new programs. The hope is that new programs can minimize error recipients of those who are then entitled to the assistance or program itself,” he added.
Regarding unemployment, Yusuf highlighted the proportion of workers in the informal sector which is still relatively large.
“This is what I think is not really implied in the RAPBN speech delivered by President Joko Widodo, even though efforts to reduce workers in the informal sector, I think, are also related to efforts to improve people's welfare in the long term,” he concluded. (gi/em/ft)
