Indonesian President Joko Widodo delivers his Annual Budget speech, ahead of the country’s Independence Day, at the parliament building in Jakarta, Indonesia, August 16, 2023. REUTERS/Willy Kurniawan/Pool
JAKARTA -Indonesian President Joko Widodo proposed a budget of 3,304.1 trillion rupiah ($216.24 billion) on Wednesday for 2024, his final year in office, promising to guard the economy against global challenges and keep food prices stable.
The budget proposal, tabled in parliament, is an increase of around 6 percent from this year’s spending plan, which has been revised up to 3,123.7 trillion rupiah.
It also assumes 5.2 percent economic growth next year, slightly above this year’s official forecast of 5.1 percent growth, and inflation running at 2.8 percent next year, below this year’s 3.1 percent outlook.
Jokowi, as the president is popularly known, said he targets the 2024 budget deficit to be at 2.29 percent of gross domestic product (GDP), roughly the same as the latest outlook for this year’s deficit of 2.28 percent.
Some economists, however, described the budget assumptions as too optimistic when global growth is expected to remain weak next year.
“The 2024 state budget architecture must be able to respond to economic dynamics, address challenges and optimally support the development and welfare agenda,” Jokowi said in his annual budget speech to parliament, a day ahead of the anniversary of Indonesia’s independence.
The president offered no specific fiscal policy for 2024, but he underscored the importance of food and energy security and building a competitive defense industry, amid global supply chain disruption due to geopolitical fragmentation.
Jokowi proposed allotting 108.8 trillion rupiah for food security, to maintain stable prices, increase farm output and further develop the government’s ongoing food estate program.
Infrastructure was allotted 422.7 trillion rupiah, including for Jokowi’s flagship project to build a new capital city on Borneo island, called Nusantara.
Jokowi has previously set a target to move some government offices to Nusantara next year from Jakarta.
The budget proposal targets government revenues to rise 5.5% next year to 2,781.3 trillion rupiah, from this year’s 2,637.2 trillion rupiah.
His proposal also assumed the rupiah exchange rate to average around 15,000 a dollar and the 10-year bond yield at 6.7% and Indonesia’s oil and gas lifting at 625,000 barrels per day and 1.03 million barrels of oil equivalent per day.
“The government must mitigate food inflation risk so that inflation expectations can be anchored,” said Joshua Pardede, economist with Bank Permata, arguing that severe dry season brought on by the El Niño weather pattern could pressure food prices.
Irman Faiz, Bank Danamon’s economist, said monetary tightening by many central banks in the world could bring downward risk to the government’s GDP outlook.
Parliament typically takes a few months to debate the government’s budget proposal.
($1 = 15,280.0000 rupiah)