Indonesia must remain prudent and vigilant, says Jokowi as
 he unveils smaller budget for 2023 

  Indonesian President Joko Widodo on Tuesday (Aug 16) tabled a 3,041.7 trillion rupiah
  (US$206 billion) budget for 2023, while reminding the nation to remain cautious amid global
  uncertainties. 

  He said in parliament: “In the future, we must continue to maintain our prudence and vigilance.” 

  “The risk from global economic turbulence remains high,” he added, referring to how the
  Russia-Ukraine war and geopolitical tensions have resulted in supply chain disruptions. 

  Mr. Widodo also predicted that next year’s economic growth will be around 5.3 percent since
  the country has managed to weather the COVID-19 pandemic. 

  Indonesia’s economic growth was up 5.44 percent year-on-year in the second quarter. It was the
  fastest growth rate in a year. 

  The 2023 budget is less than this year’s budget, which stands at 3,106 trillion rupiah. This year’s
  budget has been adjusted upwards from the original 2,714 trillion rupiah figure. 

  As of last month, the government forecasted this year’s budget deficit to be at 3.92 percent
  of GDP.  

  Mr. Widodo said that next year’s budget deficit would be a maximum of 3 percent in order for it
  to be financially sustainable for Indonesia. He said that the aim is around 2.8 percent.  

  The 2023 budget would comprise 2,230 trillion rupiah for central government expenditure and
  811.7 trillion rupiah for regional government expenditure. 

  Some key priorities include the health sector, which would get 169.8 trillion rupiah and the social
  protection sector, which would get 479.1 trillion rupiah.  

  To improve human resources, Jokowi, as the president is popularly known, wants to set aside
  608.3 trillion rupiah for education. 

  “We must be able to capitalize on our demographic bonus and be ready to face technology
  disruptions,” said Jokowi. 

  The development of infrastructure also remains a priority next year and 392 trillion rupiah is
  allocated for this. 

  Mr. Widodo forecasted next year’s inflation rate to be around 3.3 percent. It currently stands at
  around 4.9 percent.  

  He also predicted the unemployment rate next year to be between 5.3 percent to 6 percent,
  and the poverty rate to be between 7.5 percent to 8.5 percent.  

  Earlier on Tuesday, Mr. Widodo said during his annual State of the Nation Address that Indonesia
  has successfully controlled the COVID-19 pandemic while growing its economy.  

  He added that Indonesia has managed to exercise global leadership amid geopolitical tensions. 

  Source: CNA 

  Indonesia plans fuel price hike to control ballooning subsidies-media 

  Indonesia plans to hike fuel prices to control ballooning energy subsidies, media reported on
  Monday, citing comments from the country’s energy minister. 

  The price hike will be complemented with rules on subsidized fuel sales that will be issued
  this month, Energy Minister Arifin Tasrif was quoted as saying by several local media,
  including news website Bisnis.com. 

  Officials at the country’s energy, finance and economics ministries did not respond to Reuters’
  request for comment. 

  State energy firm Pertamina, which sells subsidized fuels, declined to comment, saying fuel price
  policy was the government’s domain. 

  Indonesia has tripled its energy subsidy budget to 502 trillion rupiah ($34.06 billion) this year to
  keep prices of subsidized gasoline and diesel and some power tariffs unchanged amid rising
  global energy prices. 

  Last week, finance ministry officials said that amount may not be sufficient due to rising fuel
  demand. 

  Pertamina said as of July it had sold 9.9 million kilolitres of subsidized diesel, about two thirds
  of the total quota for the year, while sales of subsidized gasoline had reached 16.8 million
  kilolitres, or 73% of 2022’s quota. 

  President Joko Widodo, in recent public appearances, has mentioned this year’s energy subsidy
  allocation is too large, but has not referred to any plan to hike fuel prices. 

  The central bank has said the large subsidy budget has helped Southeast Asia’s biggest
  economy keep inflation relatively low this year, providing monetary policymakers room to
  delay interest rate hikes. Bank Indonesia is one of a few Asian central banks that has not
  lifted its benchmark rate from pandemic era levels. 

  Said Abdullah, a senior member of the president’s political party, the Indonesian Democratic
  Party of Struggle (PDI-P), told Reuters fuel prices should be raised twice this year to manage
  the increasing fiscal burden, suggesting the first hike be made by late August. 

  The government should also increase spending on support for the poor to help them cope with
  the impact of the price hikes, Abdullah, who heads parliament’s budgetary committee, said. 

  Source: Reuters 

  Inflation may exceed 4% next year, BI warns, upping pressure on
 government
 

  The high inflation rate in Indonesia is likely to continue in 2023 as Bank Indonesia (BI) projects
  that prices will remain stubbornly high next year, extending what the country has been
  suffering throughout this year.  

  BI warns that the inflation rate may hover above its targeted 2 to 4 percent next year, according
  to presentation material shown by the central bank on Thursday during a national coordination
  meeting to tackle inflation.  

  “There is a risk that inflation may exceed the upper limit of the target range of 3 plus/minus 1
  percent, as food and energy prices will [likely] remain high, while continued increase in demand
  will add more pressure to inflation,” BI Governor Perry Warjiyo said. 
 

  The central bank estimates that, for next year, there is a possibility that inflation may go
  sideways again, just like in 2022.  

  In the 2023 state budget draft, the government has set a moderate inflation target at 3.3
  percent next year, which is higher than 3 percent typically set in previous budget plans.  

  For this year, BI and the government set the inflation target at 2 to 4 percent, but the bank
  has reaffirmed that the figure would likely surpass the upper range.  

  As of July, the inflation rate had reached 4.94 percent, driven by high food prices along with
  goods in administered price categories like airline fares and fuel prices.  

  To prevent the worst from happening, the government has been stepping up its measures at
  least for this year.  

  In this regard, President Joko “Jokowi” Widodo has asked his aides to allow regional leaders
  to use funds allocated for unforeseen contingencies, primarily to address emergency
  spending needs, in order to cover transportation and logistics costs to move excess
  staple foods toward deprived regions.  

  Jokowi also asked Transportation Minister Budi Karya Sumadi to ensure airlines would
  add more flights, hoping that would lead to a reduction in fares.   

  This included asking State-Owned Enterprises (SOEs) Minister Erick Thohir to ensure
  Garuda Indonesia could quickly bring back aircraft laid-off due to its debt-restructuring program
  in the first half of the year.  

  Jokowi has also pointed out that Indonesia has kept inflation from progressing further by
  allocating Rp 502 trillion (US$33.8 billion) worth of subsidies and compensation payable to
  energy SOEs from this year’s state budget, but he has asked Finance Minister Sri Mulyani
  Indrawati to keep an eye on sustainability.  

  Coordinating Economic Minister Airlangga Hartarto also said on Thursday that, with any
  measures in hand, the government aimed to bring down this full year inflation rate to
  between 4 and 4.8 percent, much lower than July’s figure of 4.94 percent.  

  He said such a figure was possible as most food prices, the largest contributor to inflation,
  such as rice, meat, poultry, sugar, shallots, onions and red chilies, were declining.  

  “Of course, we will make more effort along with several programs to control inflation,” Airlangga
  said. 

  Private lender Bank Permata chief economist Josua Pardede told The Jakarta Post on Thursday
  that an inflation rate above 4 percent is plausible next year, arguing uncertainties have not shown
  any sign of slowing down just yet.  

  “It’s true that many [experts] project commodity prices will decline next year, but prolonged
  geopolitical tension between Russia and Ukraine, also heightened tension between China
  and Taiwan, may drive food and energy prices up,” Josua said.  

  On the other hand, Josua noted the government’s plan to hike the price of subsidized Pertalite
  gasoline might make it harder to lower inflation, especially for next year, unless the government
  could compensate by stabilizing other prices like staple foods.  

  A 30 percent increase to Rp 10,000 per liter would trigger additional inflation of 0.92 percentage
  points on top of the already high figure, he estimated. He added that Indonesian consumers now
  have greater sensitivity to high prices compared with normal times, as they had only just
  recovered from the pandemic, implying that the government should watch for risks of
  economic-led social unrest.  

  “Like the President said, our economy has not fully recovered yet,” Josua said. 

  Source: The Jakarta Post