She added that the downward revision of the 2019 global growth projection coupled with rising global uncertainties — partly driven by the United States Federal Reserve’s normalization policy — had resulted in a challenging environment for the Indonesian economy next year.

“The global environment will likely not give us an easy challenge [in 2019] as growth is expected to weaken while uncertainty remains high,” Sri Mulyani said in Jakarta on Monday.

The International Monetary Fund recently revised its global growth projection from 3.9 percent for 2018 and 2019 to 3.7 percent in the same period, highlighting uneven recovery among countries while some previously identified risks have materialized.

In the face of such challenges, the minister urged the central government and regional administrations to work together in supporting domestic economic growth, particularly in fostering a positive climate for businesses and investments.

“Use all of our [fiscal] resources — the state budget [APBN] and regional budget [APBD] — to build resilience for our national economy from external shocks,” Sri Mulyani told hundreds of regional administration officials in a seminar held at the Finance Ministry in Central Jakarta.

Sri Mulyani added that national and local fiscal policies in the APBN and APBD should be designed to encourage a more equitable development, create more job opportunities and reduce poverty so as to boost household spending and investment in the country — the two major sources of growth for the Indonesian economy.

According to Statistics Indonesia, the country’s GDP expanded by 5.17 percent year-on-year (yoy) in the third quarter, supported by strong household spending, the primary engine of the economy, which reached 5.03 percent in the same period.

Meanwhile, investment growth was at 6.96 percent yoy, rebounding close to the 7 percent level that was previously recorded between the third quarter of 2017 and the first quarter of this year.

The government has set aside Rp 826.8 trillion (US$ 56.95 billion) in the 2019 state budget — or 33 percent of Rp 2.46 quadrillion of total government spending — to be transferred to regional administrations under various budget allocations, such as the general allocation fund (DAU) and the special allocation fund (DAK).

The figure is higher than the Rp 766.2 trillion allocated in this year’s state budget.

Other budget allocations include village funds, which increased 17 percent to Rp 70 trillion for 2019, and subdistrict funds, a Rp 3 trillion transfer scheme that will be disbursed for the first time to regional administrations next year.

Regional Autonomy Watch (KPPOD) executive director Robert Endi Jaweng said that despite the relatively large amounts of money set aside for regional administrations, their fiscal policies through their APBD have yet to be fully directed toward attracting investments and boosting the local economy.

“The impact of regional government’s fiscal policy on human capital development as well as public services is not always felt,” Robert said.

He urged the central government to improve the accountability and synchronization between budget planning and implementation in the regions, so that the APBD could become a catalyst for attracting more investments into the region.

“A larger portion of funds transferred [to the regions] must be balanced with improvements in the quality of fiscal management.”

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