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SINGAPORE: Indonesia’s President Joko Widodo unveiled a state budget on Friday (Aug 16) that promised continuity of signature economic programmes under his successor Prabowo Subianto, while keeping to a deficit that would likely reassure investors for its fiscal discipline.
Indonesia’s 2025 budget sets a target deficit of 2.53 per cent of gross domestic product (GDP), or 616.2 trillion rupiah (US$39 billion), below the 3 per cent ceiling set by law.
“The state budget should strengthen development, so that Indonesia will avert the middle-income trap by reaping the benefits of the demographic bonus, continuing economic transformation, increasing investment opportunities and forming new jobs,” said Mr Widodo in his last budget speech before Mr Prabowo takes over as president on Oct 20.
The middle-income trap refers to countries that have reached middle-income status but cannot compete in higher value-added activities to reach high-income status.
Mr Widodo said the 2025 budget focuses on a stable transition of government and continuing economic development, with a GDP growth target of 5.2 per cent.
The short-term priorities he outlined include Mr Prabowo’s signature free meals programme for children, which was a key component of the latter’s election campaign.
“The free nutritious meals programme will improve child nutrition while supporting small and medium enterprises, and improve the lives of common people in the regions,” said Mr Widodo.
Allocation for the free meals programme in the 2025 budget is 71 trillion rupiah, Finance Minister Sri Mulyani Indrawati said at a press conference after Mr Widodo’s budget speech. The amount is in line with what was previously announced.
Meanwhile, 400.3 trillion rupiah was allocated for infrastructure spending, which includes the construction of new capital Nusantara.
Critics had earlier said a budget deficit exceeding 600 trillion rupiah would be the highest in absolute terms since 2021’s deficit of 783.7 trillion rupiah, but Maybank Securities economist Brian Lee told CNA that the figure of 2.53 per cent of GDP was below expectation.
“We had expected 2.8 per cent to 2.9 per cent of GDP given Prabowo’s ambitious spending plans that he outlined on the campaign trail,” said Mr Lee.
“The Jokowi and Prabowo teams may have taken note of investors’ concerns that a budget deficit target set too close to the 3 per cent limit may risk breaching the legal limit, in the event of revenue undershoots or cost overruns,” he added.
“Budget 2025 appears to be a prudent and carefully calibrated one, focused on reassuring investors that fiscal discipline is and will remain a key pillar of Indonesia’s macroeconomic policymaking,” he said.
Mr Widodo’s budget speech came after his final State of the Nation address in the morning, in which he highlighted infrastructure development during his leadership and economic growth that outpaced the global average.
Dressed in a black outfit of the Betawi people – a group native to Jakarta – for his State of the Nation address, Mr Widodo bade farewell and apologised to the people for the second time this month.
While he had tried to give his best, he understood that his achievements could not please everyone, he said during a 20-minute speech at the People’s Consultative Assembly meeting, a yearly tradition before Independence Day celebrations on Aug 17.
“I and (Vice President) Ma’ruf Amin apologise. I apologise to every heart that may be disappointed, for every hope that may not have been realised, for every dream that may not have been achieved,” said Mr Widodo.
His previous apology, during a congregational prayer event on Aug 1, was labelled by critics as a ploy to gain sympathy.
At last year’s State of the Nation address, Mr Widodo had emphasised continuity of policies ahead of the February general election while asserting he had no authority to determine who the presidential and vice-presidential candidates would be.
Ahead of the Feb 14 polls, however, he introduced various programmes that observers said favoured the eventual winners of the presidential race – Defence Minister Prabowo Subianto and Mr Widodo’s son, vice president-elect Gibran Rakabuming Raka.
His actions were criticised as an attempt to cement his own political dynasty, especially as Mr Gibran had been allowed to run through a controversial constitutional court ruling.
On Friday, Speaker of the House of Representatives Puan Maharani spoke before Mr Widodo and made barbed references to the outcome of the presidential election.
She said the people could not be blamed for voting the way they did.
“Was the election free, honest and fair? I leave it to you to answer … Were citizens able to choose freely, honestly, fairly, without coercion, control and fear?” she asked.
While congratulating Mr Prabowo and Mr Gibran for their electoral victory, she cautioned that state power ought to be exercised in the country’s interests, rather than self-interest or the interest of particular groups.
“A statesman will think of making the country’s future brighter. A politician will think of how electoral outcomes affect the future, which ought to be better … Vision without power is futile, power without vision will become high-handed,” said Mdm Puan.
Her comments point to ongoing tension between Mr Widodo and her party, the Indonesian Democratic Party of Struggle (PDI-P), of which Mr Widodo was previously a member.
In his speech, Mr Widodo also called on his successor to continue leading the country to achieve the “2045 Golden Indonesia vision”, the country’s goal of becoming an advanced and high-income country by its 100th year of independence.
“Allow me to pass the leadership baton to you. Allow me also to share with you the hopes and dreams of all Indonesian people from Sabang to Merauke, from Miangas to the Island of Rote, from the peripheries, from the outermost regions, from rural and urban areas to you,” Widodo said.
Additional reporting by Neo Chai Chin
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