President Joko “Jokowi” Widodo on Wednesday (16/08) optimistically announced the proposed budget for 2018, which will see a smaller deficit and a planned spending increase on new infrastructure developments.
The proposed budget is also in line with the president’s stated hope to level out the wealth gap between the nation’s richest and poorest.
“Despite uncertainty in the global economy, Indonesia’s economic growth will increase, which will be boosted by strong consumer consumption, new investments and an improvement in exports and imports performance,” Jokowi said in his speech during a plenary session at the House of Representatives.
Indonesia’s economy is expected to grow at 5.4 percent in 2018, compared to the 5.2 percent growth targeted in the revised budget for 2017. However, that figure is still well below the projected growth of 7 percent Jokowi promised during his presidential campaign in 2014.
The president proposed total expenditures to reach Rp 2,204.4 trillion ($164.79 billion) next year, a 5 percent increase from expected government spending in 2017, including a Rp 20.7 trillion increase in infrastructure spending.
However, the budget’s allocation for defense and domestic security will be less in 2018 compared to this year, if the budget is approved.
The government expects the country’s deficit next year to reach 2.19 percent of gross domestic product (GDP), or Rp 324.5 trillion. That compares with the 2017 budget’s 2.93 percent of GDP, close to the country’s 3 percent deficit legal limit.
“We continue to regard Indonesia’s fiscal position as a strength and we are not worried about the fiscal deficit at this juncture,” said Gundy Cahyadi, an economist at DBS Bank.
Investors in the capital market seemed to agree with Gundy’s assessment. The benchmark Jakarta Composite Index (JCI) closed 0.98 percent higher at 5.891 on Wednesday, while the consumer goods industry sector led with a 3.46 percent gain and an index that tracks 153 stocks in the manufacturing sector trailed with a 2.1 percent gain.
“The government needs to anticipate the economic recovery in developed countries, especially in the United States, as it could trigger capital outflows from Indonesia,” said deputy house speaker Fadli Zon, a member of opposition party Gerindra.
“The 2018 proposed state budget is expected to accelerate the national economy so Indonesia can be more resilient from the influence and change coming from outside or within,” Fadli said.