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Prabowo wonders whether Indonesia needs to keep its 3% deficit cap
The presumptive president-elect also opined that the government should consider privatizing state-owned enterprises in non-strategic industries like tourism and hospitality.
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Intergenerational ticket: Presidential candidate Prabowo Subianto (left) and his running mate Gibran Rakabuming Raka, who is President Joko “Jokowi” Widodo's eldest son, arrive for the fourth electoral debate of the 2024 presidential election at the Jakarta Convention Center on Jan. 21, 2024. (Antara/M Risyal Hidayat)
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resumptive president-elect Prabowo Subianto is reappraising the mandatory state budget deficit cap of 3 percent of GDP with statements that may indicate a more expansionary fiscal policy in store for the country.
The former general pointed out that the government recorded a budget deficit of less than 2 percent last year.
He also noted that the government spending-to-GDP ratio was around 15 percent, while the government debt-to-GDP ratio was near 39 percent, well below the legal cap of 60 percent.
“Both [of those metrics] are among the lowest in the world,” he claimed at the Mandiri Investment Forum held in Jakarta on Tuesday.
Prabowo, who still holds the defense minister post in the incumbent administration, recalled that the caps for the budget deficit and the debt-to-GDP ratio had been adopted from the European Union’s Maastricht Treaty. The benchmarks were introduced in 1992 and still form the core of EU fiscal rules.
Prabowo claimed that major EU countries themselves did not meet the rules: “France’s budget deficit is near 6.8 percent, Germany’s is at 6 percent and Italy’s is at 8 percent.”
France “probably” missed the 2023 budget deficit of 4.9 percent that the government had been aiming for, news agency AFP reported last month, citing an unnamed official, while Germany’s 2023 deficit was 2.1 percent according to preliminary figures published by the country’s Federal Statistical Office. Italy is indeed struggling to reduce its deficit, which sat at 7.2 percent of GDP last year, data from the Italian National Institute of Statistics show.
