President Joko Widodo during his state of the union address to parliament today - Photo: Privacy

JAKARTA (TheInsiderStories) – Indonesian President Joko Widodo has announced the country direction in 2020 at the People’s Consultative Assembly and House of Representatives today (8/16). The president said economic growth will be at 5.3 percent with consumption and investment as the main driving force.

Inflation will be kept low at 3.1 percent to support public purchasing power. The Rupiah exchange rate is estimated to be in the range of Rp14,400 per US dollar, amidst external conditions that are still overshadowed by uncertainty.

The government believes that investment continues to flow into the country, due to positive perceptions above Indonesia and investment climate improvement. Accordingly, the 3-month Treasury bills interest rate is estimated at 5.4 percent.

Furthermore, the Indonesian crude oil price is estimated at around US$65 per barrel. With high sensitivity to various global dynamics, the Government continues to monitor global oil and commodity price movements, Widodo said.

It’s through optimizing the utilization of natural resources, including oil and gas. So oil and gas lifting target are assumed at 734 thousand barrels each and 1.19 million barrels of oil equivalent per day.

“The whole picture of the estimated macroeconomic indicators above is the basis for the preparation of the 2020 draft state budget,” the president said.

Widodo went on to say that next year, the Government will pursue three fiscal policy strategies, namely: mobilizing revenue while maintaining an investment climate, improving the quality of spending to be more effective in supporting priority programs, and finding sources financing carefully and efficiently through strengthening the role of quasi-fiscal.

“In line with this, the 2020 draft state budget policy is designed expansively, but it remains directed and measurable. This is a manifestation of the Government’s commitment to making the state budget more focused support priority activities while keeping the risks within safe limits,” he said.

In accordance with the 2020′ fiscal policy theme, the focus of the draft state budget is directed at five main things such as: strengthening the quality of human resources to create healthy, smart, skilled and prosperous human resources; acceleration of infrastructure development supporting economic transformation.

Then, strengthening social protection programs to respond to demographic challenges and anticipate aging populations; strengthening the quality of fiscal decentralization for encouraging regional independence. Also, anticipate global uncertainty.

Based on the character of an expansive but directed and measurable fiscal policy, President sai the 2020 budget deficit is planned to be 1.76 percent of GDP, or as much as Rp307.2 trillion (US$21.63 billion). State revenues and grants totaling Rp2,221.5 trillion, and state expenditures of Rp2,528.8 trillion.

State expenditure is planned to reach Rp2,528.8 trillion, or around 14.5 percent of GDP. The state expenditure will be used to improve the quality of human resources and continue social protection programs to address demographic challenges.

In addition, spending is also aimed at increasing investment and exports, through increasing competitiveness and productivity, accelerating infrastructure to improve connectivity and supporting economic transformation, and strengthening the quality of fiscal decentralization, Widodo said.

In accordance with the constitutional mandate, the Government allocates an education budget of 20 percent of state expenditure to be Rp505.8 trillion, or an increase of 29.6 percent, compared to the realization of the 2015 education budget which is around Rp390.3 trillion.

To strengthen health services in 2020, the government has allocated Rp132.2 trillion for the health budget, or up almost double the realization of the 2015 health budget of Rp69.3 trillion.

These various expenditures are expected to encourage the achievement of development targets by 2020, namely to reduce unemployment to 4.8 – 5.1 percent. Besides, poverty is expected to be reduced in the range of 8.5 – 9.0 percent and inequality decrease in the range of 0.375 to 0.380. The government is also optimistic that human quality development can continue to be improved to reach the 72.51 indexes in 2020.

US$1=Rp14.200

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