Indonesia's growth plans: Indonesia is aiming for a higher GDP growth trajectory and a more expansionary budget in 2025, as announced by government officials on Monday. The country, Southeast Asia's largest economy, is targeting a growth rate ranging between 5.3 per cent and 5.6 per cent for the upcoming year, with plans to maintain a fiscal deficit of 2.48 per cent to 2.8 per cent of the GDP. This marks a shift from the 2024 targets of 5.2 per cent GDP growth and a fiscal deficit goal of 2.29 per cent.

President Joko Widodo, nearing the end of his second term, emphasised the importance of aligning the 2025 state budget with the priorities of the incoming administration while ensuring continuity with existing policies. The victorious presidential candidate, Prabowo Subianto, and his running mate Gibran Rakabuming Raka, have proposed significant initiatives, notably a multi-billion-dollar free school lunch programme, which is factored into the economic projections for 2025.

The incorporation of Prabowo's proposed program has raised concerns amongst analysts about a potential shift towards a more expansionary fiscal policy, departing from Indonesia's traditionally conservative budget management. The program's initial phase is estimated to cost around 120 trillion rupiah ($7.68 billion) and is expected to expand substantially over the years, reaching 450 trillion rupiah by 2029. Reports suggest that this program alone could widen the fiscal deficit by 0.33 per cent of GDP in 2025.

Indonesia's GDP growth rate dipped slightly to 5.05 per cent in 2023, attributed to falling commodity prices affecting exports and tight monetary policies dampening domestic demand. However, the government anticipates a rebound in growth to 5.2 per cent in 2024, driven by increased spending associated with the recent elections and a resurgence in private investment following the easing of political uncertainties.

(With Reuters Inputs)