Indonesia’s Prabowo aims high, shoots for 8% GDP growth in next 5 years
[JAKARTA] Indonesia’s presumed president Prabowo Subianto has set an ambitious economic growth target of 8 per cent in the next five years – over his upcoming term – to vault South-east Asia’s largest economy to advanced-economy status by 2045.
Speaking at an investment forum in Jakarta on Tuesday (Mar 5), Defence Minister Prabowo, who unofficially emerged victorious in the Feb 14 presidential election, said he was optimistic about hitting this target given the country’s robust domestic demand and purchasing power.
His 8 per cent economic target is higher than outgoing Joko Widodo’s goal of 7 per cent. The 8 per cent annual growth is set to bring the country’s per capita gross domestic product (GDP) to US$25,000 by 2045, and create 10 million jobs.
Widodo, who assumed the presidency in 2014, has managed to keep domestic expansion steady at around 5 per cent at a time when the global economy teeters on the edge of a recession.
The 8 per cent target is also higher than the central bank’s forecast that the country will likely grow only around 4.7 to 5.3 per cent over the next two years, due to persistent uncertainties from abroad. Indonesia’s economy expanded 5.3 per cent last quarter compared with a year earlier, driven by strong private consumption.
Prabowo is set to be inaugurated as Indonesia’s eighth president on Oct 20 if the current results hold. The former military commander has made three attempts to secure the presidency, and was defeated in the first two by Widodo.
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Prabowo, who is running with Gibran Rakabuming Raka – Widodo’s first child – stressed the importance of effective management to harness the country’s strengths, highlighting the need to generate more employment opportunities and combat poverty.
During his campaign, Prabowo pledged to continue Widodo’s key policies, such as mineral downstreaming to expand battery and electric-vehicle manufacturing, and building the Nusantara capital in Kalimantan.
“I’m very optimistic. We will continue Widodo’s proven and relevant policies, improving them along the same trajectory,” he said, promising a “very smooth” transfer of power later this year.
In terms of investment, he aims to attract more foreign private investment through enhanced collaboration with private companies, particularly in project funding.
The 72-year-old politician is proposing strategic measures such as the privatisation of state-owned enterprises and an adjustment of tax ratios. Rather than advocating tax hikes, he aims to increase the tax-to-GDP ratio to 16 per cent by broadening the tax base as a means of enhancing revenue and financial stability.
“There’s still too much inefficiency in our economy. We must have better management, a more efficient structure, and we must cut down on corruption,” he said.
He added that Indonesia has maintained prudent fiscal discipline, noting that new administrations had not defaulted on previous governments’ debts.
Investment-friendly environment
Bank Indonesia governor Perry Warjiyo said at the same event: “Indonesia’s economy is strong but remains vigilant because of global uncertainty.”
He has repeatedly said Indonesia has room to loosen monetary policy, likely in the second half of this year, as global uncertainty has begun to ease and the US Federal Reserve is also expected to cut rates by then.
Meanwhile, Finance Minister Sri Mulyani said the country needs to continue its structural reform to create an investment-friendly environment to sustain growth. She highlighted that Indonesia cannot rely solely on government spending to boost the economy, as fiscal measures have limits. “Therefore, attracting foreign direct investment and investment in general is very important,” she said.
Free lunches
There are growing concerns about the potential strain on the country’s budget due to Prabowo’s extensive spending proposals. In their latest note, analysts from Fitch Ratings flagged that the politician’s programmes could raise Indonesia’s medium-term fiscal risks.
During his campaign, Prabowo proposed a free school lunch programme that could cost around 460 trillion rupiah (S$39.2 billion), surpassing the entire 2023 budget deficit.
Emphasising a commitment to enhancing health and education outcomes, he has outlined plans to provide free lunches and milk to more than 80 million children. He anticipates that this initiative will not only benefit children, but also create employment opportunities for women and support small businesses.
The current government has proposed a wider budget deficit, ranging from 2.45 to 2.8 per cent of GDP in 2025, possibly encompassing Prabowo’s free lunch programme.
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