Indonesia’s Vigilantly-Measured 2023 APBN Projection

Following the annual meeting of the MPR RI with the DPR/DPD RI ahead of the 77th Indonesia’s independence day at the Nusantara Building on Tuesday (8/16), President Joko Widodo announced the projections of the 2023 State Revenue and Expenditure Budget (APBN) along with its financial notes. Indonesia is acknowledged as one of the countries that had overcome the COVID-19 pandemic with its relatively fast economic recovery. The recovery trend grew 5.01% in the first quarter and strengthened significantly in the second quarter of 2022. Mainly fueled by the expansive growth of several strategic sectors in manufacturing and trade, the positive trend was also supported by the improving public consumption and solid export performance. This reflects the success of the industrial downstream strategy that Indonesia has been focusing on since 2015, also supported by the mining sector in line with rising global commodity prices. Indonesia's inflation is much more moderate compared to other countries, with its inflation rate at 4.9% (YoY) as of July 2022. This is supported by the role of the state budget in maintaining the stability of energy and food prices. Consequently, the energy subsidy and compensation budget in 2022 is expected to reach Rp502 trillion, which is a far inflated number from the initial 2022 APBN. In contrast to Indonesia, a number of countries couldn’t afford to stabilize their high inflation, forcing central banks to carry out aggressive monetary tightening policies, resulting in unstable financial markets in several developing countries. As a result, the currency exchange rates of most developing countries have weakened. Considering these pressures, the IMF predicts that global economic growth will slow significantly from 6.1% in 2021 to 3.2% in 2022 and 2.9% in 2023.

Despite the projected global growth decline in 2023, the Indonesian economy is estimated to grow by 5.3%. The government is putting its best efforts in maintaining the sustainability of the strengthening national economy by consistently expanding production to increase employment, realizing new sources of growth, and encouraging structural reforms to further accelerate the economic transformation. President Jokowi stated that the 2023 APBN will focus on five main agendas. First, strengthening the quality of productive, innovative, and competitive superior human resources through enhancing the quality of education and hastening the reform of the social protection system. Second, the acceleration of infrastructure development to enable economic transformation, particularly in the domains of energy, food, connectivity, and information and communication technology. Third, increasing the effectiveness of employee reform implementation through simplifying regulations. Fourth, the implementation of industry revitalization by encouraging the downstream to boost high-value, export-oriented economic activity. Fifth, stimulate the growth and development of the green economy. Furthermore, the president also stated that 2023 is the momentum to execute thorough fiscal consolidation to maintain the balance between countercyclical capabilities and efforts to limit financing risk. Fiscal consolidation and reform must continue to be broad, progressive, and measurable. Starting with boosting the state's revenue, improving spending, and carefully controlling financing.

The 2023 State Revenue and Expenditure Budget draft (RAPBN) is planned at Rp3,042 trillion. The budget includes Central Government expenditures of Rp2,230 trillion and a health budget of Rp169.8 trillion, or about 5.6% of state spending. The social protection budget is allocated at Rp479.1 trillion to help the poor, and in the long term, it is expected to cut the poverty chain. An education budget of Rp608.3 trillion has been prepared to increase the productivity and quality of human resources. Furthermore, the president emphasized five things: providing ease of access to education at all levels of education, improving the quality of supporting facilities for educational activities, strengthening links and matches with the job market, equalizing the quality of teaching, and strengthening the quality of early childhood education services. Another subject that becomes Jokowi's primary concern is infrastructure development which is budgeted at Rp392 trillion. The government plans to support strengthening the provision of essential services, increasing productivity through connectivity and mobility infrastructure, providing affordable energy and food infrastructure, concentrating on environmental aspects, and equitable distribution of infrastructure and access to Technology, Information, and Communication (ICT). President Jokowi also targets a 2.85% deficit in the 2023 APBN of Gross Domestic Product or Rp598.2 trillion. The number is much lower than the current year's deficit, which is forecasted at 3.92% of GDP or Rp732.2 trillion. Summing up, the government's commitment to maintaining fiscal sustainability must be carried out with total discretion, taking into full consideration that the level of debt risk must always be within safe limits through financial market deepening. With all things considered, hopefully the plans can be accomplished and the targets to be realized accordingly for Indonesia to maintain the current steady positive growth moving forward.

Sources:

Bisnis

CNBC Indonesia

Kementerian Sekretariat Negara RI

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