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Higher growth promised in 2017
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The government has promised slightly higher economic growth in 2017 amid a challenging global situation and slow economic recovery.
“Realistic”, “credible” and “sustainable” were three words that President Joko “Jokowi” Widodo highlighted when he spoke in front of lawmakers at the House of Representatives on Tuesday.
The annual event saw Jokowi deliver the 2017 state budget, which he said would become a fiscal instrument to support poverty eradication, disparity reduction and job creation.
“To support them, the upcoming APBN [state budget] needs to be realistic, able to uphold priority programs, credible, resilient and sustainable, whether in a short or medium period,” he said.
He went on to explain three key policies contained in the budget, namely a taxation policy that will support economic movement, a spending policy that will put an emphasis on productive and priority spending and a financial policy to improve resilience and risk management by maintaining deficit and debt ratio.
The speech seemed to be designed to regain people’s trust and confidence about the future on the back of the slow realization of the 2016 state budget, low tax revenue collection, public disputes among the President’s aides and Cabinet reshuffles due to the unsatisfactory performance of ministers.
The cash-strapped administration has so far failed to achieve its economic targets since 2014. Last year the economy only expanded by an annual 4.8 percent, the lowest in the past six years.
For 2017, it promises 5.3 percent growth in gross domestic product (GDP), slightly higher than the 5.2 percent growth forecast for 2016.
It believes global economic improvement and effects from this year’s implementation of economic packages will help achieve the growth target, despite smaller revenue and spending outlooks.
In taxation, the government claims ongoing tax amnesty and law enforcement programs can help widen the tax base, and at the same time, it plans to offer more consumer- and investor-friendly taxation policies.
Meanwhile, in terms of spending, Jokowi laid out six priorities, including infrastructure development and interregional connectivity, improvement in goods expenditure and more accurate subsidy disbursements.
The Public Works and Public Housing Ministry — which deals with most infrastructure projects — is slated to obtain the largest spending allocation again with Rp 105.6 trillion (US$8.1 billion), higher than the Rp 97.1 trillion earmarked this year.
Some of the infrastructure projects targeted in the 2017 state budget include the construction of 815 kilometers of roads, 9,399 kilometers of bridges and 14 new airports.
At the end of his speech, the President acknowledged that his administration was still taking a “guided expansive fiscal policy” to increase production capacity with a 2.41 percent budget deficit of GDP.
After the event, Finance Minister Sri Mulyani Indrawati reaffirmed the government’s plans. “The government will continue to improve tax collection without shrinking economic activities,” she told journalists at a press briefing at the Taxation Directorate General.
Meanwhile, Coordinating Economic Minister Darmin Nasution, who was present at the briefing, said the government wanted to convey a message that it was optimistic the economy would not slow down even though the global economy was experiencing a decline.
Kenta Institute economist Eric Sugandi and Bank Mandiri chief economist Anton Gunawan welcomed the government’s efforts to maintain an expansive fiscal policy to boost economic growth. “The multiplier effect of government spending won’t be big, but it will be in line with next year’s growth assumption,” Anton said.
Indonesian Employers Association (Apindo) chairman Hariyadi B. Sukamdani said the proposed 2017 state budget was positive as the government had realized that this year’s budget was overly optimistic.
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