Indonesian President Joko Widodo set a modest growth outlook next year as he underscores a narrowing window to get the country’s young population rich before it grows old.
(Bloomberg) — Indonesian President Joko Widodo set a modest growth outlook next year as he underscores a narrowing window to get the country’s young population rich before it grows old.
Gross domestic product is expected to grow 5.2% in 2024, Jokowi — as the president is known — said in his annual budget speech to parliament on Wednesday. That’s toward the lower end of a 5.1%-5.7% initial estimate.
Fiscal deficit is projected to be 2.29% of GDP next year, in line with the government’s latest outlook for this year’s shortfall at 2.28%, lower than the figure in the 2023 budget. That’s still well below the legal limit of 3%.
Southeast Asia’s largest economy has shown resilience by emerging from the pandemic with growth returning to a 5% trajectory despite higher interest rates and slumping exports. Last quarter’s 5.2% GDP expansion is poised to top most peers in the region, even as cracks are starting to show in exports and household consumption.
“A fast and strong economic recovery has brought Indonesia to become an upper middle-income country,” said Jokowi, whose second and final term ends next year. Still, “Indonesia’s opportunity to get out of the middle-income trap is not open forever.”
The rupiah extended its gains to 0.4% against the US dollar after the speech, posting its largest jump in a month. The benchmark stock index was down 0.2%.
Even the 5.2% growth for next year is an optimistic target, said Finance Minister Sri Mulyani Indrawati at a Wednesday briefing. Higher-for-longer interest rates will dampen global growth, while China’s economic slowdown, geopolitical tensions and falling commodity prices pose downside risks, she added.
Election-related spending, which is set to exceed previous presidential races, along with infrastructure projects could help sustain growth through next year. The campaign period is set to run from late November to February, before Indonesians head to the polls on February 14.
The president only briefly mentioned his ambition to build a $34 billion new capital city in Borneo, despite highlighting the importance of infrastructure to bolster growth. The flagship project seen as integral to Jokowi’s legacy has progressed slowly, with no concrete deals with any foreign private investors since the project broke ground last August.
Next year’s 8% average wage increase for civil servants, affecting as many as 4.3 million workers, could boost household demand as Indonesia relies more on domestic growth engines amid a slowing global economy. For retired officials, the pension boost is around 12%. The last time Jokowi increased government salary was in the election year of 2019.
–With assistance from Norman Harsono, Chandra Asmara, Eko Listiyorini, Soraya Permatasari, Yudith Ho and Faris Mokhtar.
(Adds finance minister comment in seventh paragraph.)
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