Economy

A decade of positive performance in ensuring social benefits through development – Economy


ver the last decade, Indonesia has successfully integrated development across various sectors nationwide, with the government ensuring that the development agenda runs well and has a positive impact on society. Despite many challenges ranging from global economic turmoil, geopolitical tensions and pandemics to climate issues, the government has been consistently present in reaching all levels of society.

The development policy during the administration of President Joko “Jokowi” Widodo is to realize the goals of national and state life and achieve the Golden Indonesia 2045 vision. As stated in the Preamble of the 1945 Constitution, the goals of the nation and state are to protect all citizens and all territories of Indonesia, advance public welfare, educate the nation and participate in establishing a world order.

Various policies have been implemented for Indonesia to rank among the world’s top five economies, including the development of human resources with superior quality, mastery of science and technology, greater and more equitable welfare as well as strong, authoritative national resilience and governance.

Minister of Finance Sri Mulyani Indrawati, as a speaker in a public lecture at Diponegoro University on Oct. 23, 2023, said the State Budget (APBN) was one of the important tools for Indonesia to achieve its goals.

“One of the important instruments is the APBN, [part of] state finances, which are often referred to as fiscal policy because it is one type of state instrument to achieve these ideals,” Sri Mulyani said.

Wahyu Utomo, head of the APBN Policy Center, which falls under the ministry’s Fiscal Policy Agency, told a media event on Sept. 25, 2024 in in Anyer, Banten, underlined that the State Budget was a fiscal instrument to help stimulate the economy toward higher growth.

Every Monday

With exclusive interviews and in-depth coverage of the region’s most pressing business issues, “Prospects” is the go-to source for staying ahead of the curve in Indonesia’s rapidly evolving business landscape.

for signing up our newsletter!

Please check your email for your newsletter subscription.


View More Newsletter

“If economic growth is high, welfare should also increase. [Higher] welfare is also expected to be more evenly distributed and fairer,” Wahyu said.

He also emphasized that a healthy State Budget was the key to effectively stimulating the economy in support of various development directions for greater welfare. Optimal revenue, spending quality and sustainable financing were part of the strategy to realize a healthy and sustainable APBN.

A healthy APBN encourages the optimization of the fiscal policy in fulfilling its three main functions: allocation, stabilization and distribution. Through these, the APBN supports development and helps realize high economic growth while reducing unemployment, poverty and inequality.

To accelerate economic growth, support is needed for optimal and effective state spending. The steps to realize this outcome include more efficient spending on goods, equitable subsidy reform, better quality of regional spending toward greater productivity and efficiency, and focused capital spending for higher productivity. The efforts to realize quality state spending are known as “better spending”.

“Better spending is actually an effort to strengthen the quality of spending, meaning that if the spending produces quality output, it benefits the community and the economy, and also [improves] economic conditions,” explained Wahyu.

State spending grew 6.83 percent on average in 2014-2024, from an allocation of Rp 1.78 trillion (US$114 billion) in 2014 to Rp 3.62 quadrillion in 2024.

State spending also contributes greatly to economic growth and maintaining inflation. Over the last five decades, Indonesia’s economy has had stable growth of around 5 percent, higher than the global growth rate. It has also recovered faster from the COVID-19 pandemic than the global economy.

During the three years of the pandemic, the Indonesian economy contracted at a rate of minus 2.1 percent in 2020, after which it resumed positive growth at 3.7 percent in 2021 and then continued to strengthen to reach 5.3 percent in 2022.

Meanwhile, the inflation rate has also been maintained and controlled to support people’s buying power at a moderate range of 2.5 percent, plus or minus 1 percent, according to Wahyu.

“In our State Budget there are a variety of highly strategic budgets. The aim is to encourage [smooth and effective] economic transformation. Some [budgets] are dynamic, some are accelerators, some are enablers. The dynamic [one] is for human capital in education, health and social protection,” he explained.

Wahyu also noted that the state budgets from 2015 to 2023 had allocated a budget of Rp 4.01 quadrillion for the development of superior human resources.

Increasing equal access to quality education services was the key to increasing the quality and competitiveness of Indonesia’s human resources: healthy, intelligent, skilled people with strong character who are also adaptive and innovative.

Indonesia’s education sector has shown good results over the past decade of development, especially in the number of educational institutions. For example, the number of elementary schools has increased over the past 10 years from 147,513 to 148,758, while junior high schools have increased from 36,518 to 42,548 and senior high schools have grown in number from 24,934 to 28,697.

In addition, the gross participation rate for higher education had increased from 25.76 percent in 2014 to 31.45 percent in 2023.

The health budget increased between 2015 and 2023 to reach Rp 1.34 quadrillion, including Rp 293.7 trillion allocated to handling the COVID-19 health emergency from 2020 to 2022.

“We can also see the impact. Stunting fell to 21.5 percent in 2023 compared to 2013, when it was still at 37.2 percent. The number of hospitals also increased quite significantly from 1,855 to 2,636. The number of Puskesmas [community health centers] also increased from 9,731 in 2014 to 10,416 in 2023,” Wahyu said, citing the latest available data.

Meanwhile, the social protection budget of Rp 3.13 quadrillion had a positive impact over the past decade, particularly in significantly reducing the poverty rate to a single-digit range.

From 11.25 percent in 2014, the poverty rate declined to 9.03 percent in 2024. Over the same period, the inequality rate also fell from 0.406 to 0.379, while unemployment decreased from 5.9 percent to 4.82 percent.

“Even the current unemployment [rate] of 4.82 percent, if we look back, is the lowest [recorded] unemployment in history,” Wahyu said.

Infrastructure development with an aim to increase competitiveness reached Rp 3.17 quadrillion between 2015 and 2023, he continued, noting that the number of toll roads in operation increased sharply from 879 kilometers in 2015 to 2,817 km in 2023. This indicated greater logistical connectivity and increased distribution of development results, which supported the economy’s growth.

Fiscal discipline is a reflection of Indonesia’s credibility and the government’s prudent financial management over the past 10 years, even in the eyes of the international community. The Indonesian economy has emerged as one of the best in the world, with average economic growth of above 5 percent, stable inflation and the fiscal deficit under control.

“In the midst of uncertainty, we must still be disciplined fiscally. The way to do this is to manage risks,” Wahyu said.

The government maintains strict fiscal discipline to meet the APBN deficit cap of 3 percent of gross domestic product (GDP). The fiscal deficit has averaged 2.2 percent of GDP during the past decade. The fiscal deficit was 2.14 percent in 2014, and increased slightly to 2.5 percent in the years up until the pandemic broke out in 2020, when it increased sharply to 6.14 percent to accommodate efforts to handle the COVID-19 emergency and related impacts, as well as the national economic recovery program.

In 2021, the deficit decreased to 4.57 percent and in 2022, it decreased further to 2.38 percent, returning to a level within the mandated 3 percent cap. Accompanied by more efficient budget financing, the primary balance also fell significantly to approach pre-pandemic levels and in 2023, the deficit fell yet again to 1.61 percent.

Fiscal discipline is part of the state policy on responsible and planned financial management, which generates many positive outcomes for Indonesia’s economy and its people. By practicing good fiscal discipline over the past 10 years, the government has created a more stable, sustainable and fair economic environment from which the entire community benefits, so Indonesia can continue to build, respond to pandemics and crises, manage global risks and uncertainty and ultimately, grow an economy for the future.

Source: Finance Ministry



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

Financial World News @2024. All Rights Reserved.