His ambitious fiscal targets could boost investors’ sentiment amid an EM rout that’s hit Indonesia hard
JAKARTA • Indonesian President Joko Widodo (picture) plans a record spending next year to support growth as he seeks to shield the US$1 trillion (RM4.1 trillion) economy from an emerging-market (EM) rout and brighten his chances of a re-election.
Economic growth is forecast at 5.3% in 2019, Widodo, known as Jokowi, said in his budget speech at the Parliament in Jakarta yesterday. The budget deficit is forecast to shrink to 1.84% of gross domestic product (GDP) from a revised estimate of 2.12% for this year, he said.
Government spending will increase 10% to 2,439.7 trillion rupiah (RM684.7 billion) in 2019, while revenue is estimated to rise 12.6% to 2,142.5 trillion rupiah, he said.
“The state budget is healthy because it is designed in a prudent, realistic and effective manner in order to improve Indonesia’s development, while it is also anticipative in facing domestic and global challenges,” Jokowi said.
Jokowi’s ambitious fiscal targets could boost investors’ sentiment amid an EM rout that’s hit Indonesia hard this year. The president’s political opponents have criticised him for economic mismanagement with growth stuck at about 5% and a currency that’s lost more than 7% this year.
“The government clearly is prioritising stability and credibility of fiscal and monetary policy, and a lower fiscal target even in an election year is a proof of that,” said Rahul Bajoria, a senior economist at Barclays plc in Singapore.
About 17% of the planned spending next year is for infrastructure. The budget also contains goodies for civil servants with an increase in their salaries and pensions.
The president is pitted against Prabowo Subianto in a rematch of the 2014 elections and the former general has wasted little time in attacking him for failing to meet his 7% growth target and defend the rupiah.
The rupiah was trading at 14,615 per dollar yesterday afternoon, near its weakest level since 2015.
After focusing on more than US$300 billion of infrastructure projects to better connect the archipelago in the past four years, Jokowi is now turning his attention to creating more jobs and developing a pool of skilled workers.
Earlier yesterday, the president called for a deepening of reforms for the nation to escape the “middle-income trap”.