5-3-2024 (JAKARTA) Indonesia’s Defence Minister, Prabowo Subianto, poised to become the country’s next president, outlined his economic vision at the Mandiri Investment Forum on Tuesday. He emphasized a commitment to fiscal responsibility and maintaining a robust economy, targeting 8% economic growth over the next five years.
Prabowo’s plan involves expanding the tax base without introducing additional levies, aiming for a tax revenue target between 14% and 16% of the gross domestic product (GDP). He reassured investors of prudent financial management, highlighting positive trade balances and healthy reserves as indicators of Indonesia’s economic resilience.
The defence minister’s speech followed his claim of victory in the recent presidential election, securing nearly 60% of votes based on quick counts. The official declaration from the election commission is expected by March 20.
Preserving fiscal discipline is a key priority for Prabowo, who seeks to uphold Indonesia’s legally mandated budget deficit cap at 3% of GDP. This commitment to economic reforms and fiscal responsibility is seen as crucial for maintaining Indonesia’s current BBB credit rating at Fitch Ratings.
During his speech, Prabowo addressed concerns over potential overspending, indicating a focus on improving health and education outcomes. He unveiled plans to provide free school lunches and milk to over 80 million children, with the aim of generating employment opportunities for women and small businesses.
However, reports suggest that Prabowo’s ambitious spending proposals have sparked tension within the cabinet, particularly with Finance Minister Sri Mulyani Indrawati. She cautioned against relying solely on the state budget to boost demand, emphasizing the need to enhance the quality, not just the size, of government expenditures.
Indonesian bonds experienced a slight decline as investors expressed concerns over a potentially looser fiscal stance. The yield on five-year bonds rose three basis points to 6.53%, marking the most significant increase in a month.
Prabowo’s transition to leadership has also raised concerns among democracy activists, fearing a return to authoritarianism due to the former military general’s past human rights accusations. In response, Prabowo lauded the importance of democracy, acknowledging its challenges and calling for continuous improvement in Indonesia’s democratic processes.
As President Joko Widodo concludes his second term in October, Prabowo has assured a smooth transition, pledging to continue existing policies and potentially rationalizing and privatizing unnecessary state-owned enterprises.
