Indonesia's Finance Minister Sry Mulyani Indrawati - Photo: The Finance Ministry.

JAKARTA (TheInsiderStories) – Indonesia’ finance minister rated that the global economy could be hit by a second wave of damage from the United States (US) – China trade war. The escalation has “created a point of no return” and “cannot be measured” but will be significant and can push the world to an “absolutely uncertain era”, she added.

The type of coordinated policy response seen during the global financial crisis a decade ago could help counter the threat, she said, but right now “it seems like the world is heading in a direction that nobody wants”.

“The policy’ action is not coherent. That’s creating very weak confidence among many economic players in the world in the ability of leaders or decision-makers to actually avert or avoid this recession,” she said in parliament yesterday.

Currently, Indonesia’ government and House of Representatives are on a discussing the 2020 macro assumption. The government targets economic growth by 5.3 percent with consumption and investment as the main engines. Inflation will be maintained low within the range of 3.1 percent, to support people’s purchasing power.

Finance Minister Sri Mulyani Indrawati said that the 2020 draft state budget was designed to accelerate competitiveness through innovation and the quality of human resources.

Some new things that are strategic and included in the draft state budget are tax incentives to support the quality of human resources. The policy that has been launched by the government is in the form of tax reduction, namely super deductible tax to realize the acceleration of vocational, research and development.

“The Indonesian economy will still be maintained in terms of consumption, we expect investment to increase, especially in the second half with capital inflow,” the minister said.

Meanwhile, amid external conditions that are still overshadowed by uncertainty, the Rupiah exchange rate is estimated to be in the range of Rp14,400 per US dollar.

The government believes that investment continues to flow into the country, due to positive perceptions of Indonesia and improvement in the investment climate. Thus, the 3-month Government Treasury Bill interest rate is estimated at 5.4 percent.

Furthermore, Indonesia’s Crude Oil Price is estimated at around US$65 per barrel. With high sensitivity to various global dynamics, the government continues to monitor the movement of global oil and commodity prices.

Then, optimizing the utilization of natural resources, including oil and gas, the target of lifting oil and gas in 2020 is assumed to be 734 thousand barrels and 1.19 million barrels of oil equivalent per day, respectively.

The minister also went on to say that the policy of the 2020 Bill on the State Budget is designed in an expansive way but remains directed and measured. This constitutes the manifestation of the Government’s commitment to draw up a more focused Bill of State Budget to support the priority activities by sustaining the risk within safety limits.

“The entire picture of the estimated macroeconomic indicators is the basis for the preparation of the 2020 draft state budget,” she ended.

Meanwhile, national development planning minister Bambang Brodjonegoro discussed the allocation of funds in the 2020 draft state budget which will be included in the five national priorities in the 2020′ government work plan.

Of the five main parts, human development and poverty alleviation receive the highest funding allocation, amounting to Rp157 trillion ($11.05 billion). It is planned that the infrastructure and regional distribution will receive funding of Rp75.5 trillion.

Furthermore, food security, water, energy, and the environment will receive Rp43 trillion, followed by defense and security stability which will get Rp36.6 trillion.

The smallest allocation was obtained by the added value of the real sector, industrialization, and employment opportunities that received Rp24 trillion.

The minister continued, these five priorities have six main streams. The six are gender equality, governance, disaster vulnerability, and climate change, socio-cultural capital, sustainable development, and digital transformation.

“The total budget that we got was Rp337.3 trillion,” he ended.

US$1=Rp14.200

Written by Lexy Nantu, Email: lexy@theinsiderstories.com