3 hours ago
7
January 24, 2025 | 01:04 pm
TEMPO.CO, Jakarta - It is predicted that the government’s target of 8 percent economic growth this year will be difficult to achieve. There are many policy inconsistencies.
PRESIDENT Prabowo Subianto’s target of 8 percent economic growth this year seems like a futile endeavor. As there has been no structural overhaul of policies to stimulate the economy, and given the uncertain global situation, it will be difficult to achieve this target.
Prabowo announced the 8 percent economic growth target at his inauguration as Indonesia’s eighth president in October 2024. Since then, there have been no concrete explanations of how he will resolve the problems left behind by the previous administration in order to achieve this target. For example, there is no policy to remove the inefficiencies in a number of business activities.
The government should understand that the achievement of this high growth target requires processes and time. Since the independence of Indonesia, the highest economic growth, of around 10 percent, was achieved only in the era of President Suharto in the 1970s, when the price of crude oil soared. The relatively stable economic growth of around 6 percent during the time of President Susilo Bambang Yudhoyono was the result of increasing commodity prices.
Inconsistencies in policy will also hamper economic growth. For example, on one occasion, Prabowo called for savings in order to maintain a balanced state budget. However, at another time, he pushed for populist policies, such as the food estate project, which has proved to be a total failure.
Another problem that has not yet become a priority is the obstacles to investment caused by high inefficiencies. Indonesia’s incremental capital-output ratio (ICOR)—a parameter that measures the efficiency of investment—for 2023 was 6.33 percent, far above the ideal level of 3 to 4 percent. Meanwhile, the ICORs of neighboring countries competing with us for investment are only around 4 to 5 percent.
With a high ICOR, it will be a miracle if Prabowo is able to achieve his administration’s target of Rp13,032 trillion of investment over the next five years in order to bring about this 8 percent economic growth. Especially since, as usual, this is another bombastic target from the government with no accompanying detailed explanation of how it will be implemented.
Moreover, it will also be difficult to drive public consumption, and consequently boost the economy through increased government spending, because there is simply not enough budget. The government already increased its spending on a number of large social programs, such as the free nutritious meal program. As a result of this, the government will have to cover the huge budget deficit through borrowing.
The continuing decline in the contribution of household spending to economic growth must also be monitored carefully because it is an indication of weakening buying power. Public consumption has long been the main contributor to Indonesian economic growth.
These obstacles to achieving the 8 percent economic growth target this year should be matters of serious concern for Prabowo. Fundamental improvements to the drivers of economic growth and an end to inconsistent policies are far more important than making big promises that it will be difficult to keep.
At the same time, there is no shame in revising the previously announced growth target.
State Secretary Confirms School Zoning System to Remain in School Admissions
4 jam lalu
State Secretary Prasetyo Hadi the final decision regarding the school zoning system will be made after President Prabowo returns from his India visit.
Celios Highlights Risk of High Budget Leakage in Free Nutritious Meal Program
5 jam lalu
Celios said the potential for budget leakage stems from several factors, including inefficient program management and opportunities for corruption.
Prabowo Invites Indian Entrepreneurs to Invest in Indonesia
15 jam lalu
Today, President Prabowo Subianto departs for India, attending the nation's 76th Republic Day on January 26, 2025.
Prabowo-Gibran's Energy Transition Gets D-Rating from Greenpeace Indonesia
16 jam lalu
Greenpeace Indonesia believes the government's efforts in the energy transition sector have been far from optimal in the first 100 days.
Police Reveal Scam Scheme Using Fake Videos of President Prabowo
16 jam lalu
The scam scheme has been used by the suspect since 2020. One suspect was arrested in Lampung, while the other remains a fugitive.
Saudi Arabia Plans $600bn in New U.S. Investment, Trade Over Four Years
18 jam lalu
Trump fostered close ties with Gulf states, including Saudi Arabia, during his first term.
Prabowo Kicks off First State Visit to India
18 jam lalu
President Prabowo Subianto departs for India to attend Republic Day celebrations. This will be his first state visit to India.
No Meeting Between Prabowo and Megawati Today
19 jam lalu
Gerindra's Dasco confirms that President Prabowo Subianto did not meet with PDIP Chair Megawati Soekarnoputri today.
Prabowo Asks Regional Governments to Cut Official Trip Budgets by 50 Percent
20 jam lalu
Prabowo has implemented a similar policy earlier and claimed to save Rp3.6 trillion.
National Strategic Projects are Destroying Palu Bay
21 jam lalu
Hills in Palu are being cleared. The soil and sand are being excavated to build the Nusantara Capital City and food estates. Distributing environmenta
