Indonesia's 2025 Deficit at 2.53% of GDP in Proposed Budget

MACROECONOMICS - JAKARTA. Indonesia's budget deficit is forecast to be 2.53% of GDP in 2025, outgoing President Joko Widodo said on Friday as he proposed annual spending of 3,613.1 trillion rupiah ($230.3 billion) to fund the agenda of president-elect Prabowo Subianto.

Expenditure in the proposed 2025 budget, which was jointly prepared by Widodo's ministers and Prabowo's economic team, is almost 6% higher than this year's forecast.

The 2025 deficit is estimated at 616.2 trillion rupiah, compared with the current forecast for the 2024 deficit of 609.7 trillion rupiah or 2.7% of GDP.

The new budget proposal assumes Southeast Asia's largest economy expands 5.2% in 2025, similar to the forecast range for GDP growth this year of 5% to 5.2%.

Investors have been paying close attention to Prabowo's first budget, concerned that the president-elect might abandon strict fiscal rules after his speeches had signalled an appetite for expansionary fiscal policy and higher debt levels.

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By law, the government must keep the annual fiscal deficit under 3% of GDP, while debt-to-GDP ratio cannot exceed 60%.

Prabowo has pledged to boost growth to 8%.

The budget proposal called for 71 trillion rupiah allocation for Prabowo's free school meals, unchanged from previous announcement.

The programme is set to be implemented in stages, first in regions with high stunting and poverty rates, according to the proposal submitted to the parliament.

A total of 400.3 trillion rupiah is proposed for infrastructure spending in 2025, including for the continued construction of Indonesia's new capital city Nusantara on Borneo island.

The government targets total revenues at 2,996.9 trillion rupiah next year, up 7% from this year's most recent outlook of 2,802.5 trillion rupiah.

($1 = 15,686 rupiah)