Indonesia's 2025 Budget Plan Signals Fiscal Prudence Under New President - Analysts
In a move that has captured the attention of investors worldwide, Indonesia's outgoing government has submitted a 2025 budget plan to parliament targeting a narrower deficit than this year. Analysts are interpreting this as a sign that Southeast Asia's largest economy will remain fiscally prudent under its next president.
The budget proposal, worth a staggering 3,613.1 trillion rupiah ($230 billion), projects a deficit of 2.53% of GDP next year, which is narrower than the expected 2.7% for this year. This move is crucial as it signals a commitment to responsible fiscal management.
President Joko Widodo, also known as Jokowi, emphasized the need for structural reforms and collaboration among fiscal, monetary, and finance policies. This has reassured investors who were concerned about the potential for a shift towards more debt accumulation in pursuit of higher GDP growth targets.
The government is legally required to keep the annual fiscal deficit under 3% of GDP, with the outstanding public debt-to-GDP ratio capped at 60%. Currently, this ratio stands at a manageable 39%, providing a solid foundation for economic growth.
Overall, the proposed budget has been well-received by experts in the financial industry. Handy Yunianto, head of fixed income at Mandiri Sekuritas, believes that the government's commitment to fiscal prudence is a positive sign for bond investors. Economist Ryota Abe at Sumitomo Mitsui Banking Corp is cautiously optimistic, awaiting further details on the policies that will be pursued by the new finance minister.
The budget proposal envisions a 5.2% growth in the economy for 2025, supported by expansionary measures and expected monetary easing. Inflation is projected at around 2.5%, in line with the central bank's target range. Total revenues are expected to increase by 7% next year, indicating a healthy outlook for the economy.
Key initiatives in the budget include a new excise tax on sugary drinks and allocations for infrastructure projects, including the construction of Indonesia's new capital city. Additionally, there are plans to reform the energy subsidy policy, moving towards targeted distribution to individual beneficiaries.
Overall, the 2025 budget proposal sets a solid foundation for sustainable economic growth and prudent fiscal management. Investors and stakeholders can take comfort in the government's commitment to responsible financial practices, which bodes well for Indonesia's future prosperity.