JakartaPost-Aug 13
As President Prabowo Subianto prepares to deliver the Financial Notes in a speech before the People’s Consultative Assembly on Friday, kicking off the formal drafting of next year’s state budget, attention has turned to how the plan will shape the nation’s economy. Economists stress that creating a credible plan is more important than painting a bold aspiration, as the government continues to propose ambitious economic growth targets, while seeking to uphold fiscal prudence. Permata Bank chief economist Josua Pardede told The Jakarta Post on Tuesday that small changes in the budget plan were “normal, given that the economy keeps shifting” but he emphasized that creating a devisable plan was imperative since the document functions as a benchmark and signal for households, businesses, banks and investors. “What’s dangerous is big, recurring deviations because that way the budget would lose its function as the policy anchor. […] The point is, the 2027 state budget should not be a very ambitious document, but rather a most-trusted document,” said Josua. The initial process of drafting the state budget, involving both the government and the House of Representatives, had been carried out in May, resulting in an initial document containing macroeconomic outlines that were further deliberated until June. The outlines form the building blocks of the state budget bill, which will be discussed at length throughout August and September before being passed into law to guide policy execution next year. The outlines contain macroeconomic assumptions, including gross domestic product growth, inflation and the exchange rate, alongside fiscal projections such as state revenue and spending, as well as the budget deficit. The GDP growth target was set at between 5.8 and 6.5 percent in the assumptions, well above the typical 5 percent pace Indonesia has maintained over the past decade and a half, largely to accommodate the administration’s goal of achieving 8 percent growth during Prabowo’s term. Indonesia recorded economic growth of 5.61 percent in the first quarter of this year and 5.29 percent in the second quarter, not far off the 5.4 percent target set in the 2026 budget plan.
