Indonesia’s Stimulus Packages and Economic Politics
The Indonesia government has rolled out a comprehensive package of stimulus measures to revive consumption and boost economic activity, targeting the next two months. The measures include fare subsidies, cash handouts, and food distribution, which will commence on June 5. These initiatives, collectively amount to a total expenditure of 24.44 trillion Rupiah (approximately US$1.5 billion), which is expected to be fully funded by the government’s coffers.
Sri Mulyani Indrawati, the finance minister, highlighted that state-owned companies will cover 850 billion Rupiah of the costs associated with these policies. The remaining expenses will be drawn from the government’s coffers. This structure reflects the government’s belief that state companies can secure funds rapidly, while covering the overwhelming majority of costs with public assistance as a fallback.
The previous stimulus package, announced on May 24, included a wide range of measures to address various economic challenges, including automotive铁路故障补贴、基础设施维护和 enumerate与 Duties (E&D) discounts. These initiatives were designed to inject momentum into the economy, particularly during the uncertain period of the COVID-19 pandemic.
On May 27, additional discounts were offered on electricity bills and transportation costs, along with cash and food handouts, to selected households. These handouts, which began on June 5, were intended to minimize财政负担 while still providing some level of assistance to households facing economic hardships.
With school holidays marking between June 28 and July 12, Indonesia plans to extend its support for domestic consumption through discounts on train tickets and sea transport services. This initiative aims to stimulate not only month-to-month consumption but also highlight the importance of travel in promoting economic and social prosperity.
The economy in Southeast Asia has shown a strong consequat in the first quarter, growing by 4.87%. However, this growth rate is weaker than the previous three years and is also affected by unfavorable global trade conditions. Analysts, however, have foreseen the need for a broader, more comprehensive package of stimulus measures that will surpass the current one to sustain growth in the second quarter, aiming for a growth rate of at least 5% year-over-year, excluding broader measures related to rising U.S. tariffs.
Sri Mulyani’s comments underscore the government’s deliberate cancellation of a plan to reduce electric utilities’ tariffs by 50%, stating that the budgeting process would take far too long. Instead, the $14.95 billion allocation initially directed towards the Wage Subsidy Assistance (SAK) program, targeting workers earning below 3.5 million Rupiah per month, was redirected to this measure.
Sri Mulyani has also emphasized the importance of supporting the middle class, highlighting the potential losses to businesses due to the economic measures. She has proposed a shift towards saving 50% of short-term subsidies rather than carbon emissions in the phase-out timeline. The government’s intention is to prevent the business sector from being overrun by constraints.
The recommendations suggest a countdown to the end of the 2022 calendar year, ordering further discounts and handouts until funds are released. These plans are set to take effect from 2023, creating an environment for ongoing consumer spending and economic growth.
Overall, Indonesia’s attempt to stimulate demand through major stimulus packages aligns with broader regional efforts but faces challenges, particularly from the United States’ tariffs. The government must continue to prioritize domestic consumption and foster a climate of economic resilience for its middle class.
