Center of Reform on Economic (CoRE) economist Yusuf Rendy Manilet assesses that the economic growth target of 5.2% in 2025 or President-elect Prabowo Subianto’s first year in office is quite challenging. That’s because several new budget items will have large allocations.
For example, for the free nutritious meal program which is estimated to cost IDR 800 billion per day. This program is faced with the government’s difficulty in increasing state revenues because the economic situation in 2025 is expected to be as difficult as this year.
“Achieving 5.2% economic growth will be quite challenging, especially if we talk about the context of achieving 6% economic growth next year,” he said, Thursday (10/10).
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The next problem is regarding commodity prices, such as food, which are predicted to remain high next year. If commodity prices are higher than macro projections or assumptions, this will have an impact on increasing the budget deficit which cannot be funded or financed through the revenue side.
“Commodity prices will also determine the achievement of tax and non-tax revenue targets next year,” said Rendy.
To increase state revenue, the government needs to intensify and extensify taxes, as well as implement new tax rates.
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Rendy also touched on the importance of the existence of a new institution designed by Prabowo, namely the State Revenue Agency, to reap state coffers and determine how projected economic growth is achieved.
“We are waiting to see the role of the State Revenue Agency in determining the funding process in the state revenue and expenditure budget (APBN),” added the Core economist.
In line with him, Executive Director of the Institute for Development of Economics and Finance (Indef) Esther Sri Astuti believes that the first year of Prabowo Subianto’s administration requires very large investments, up to hundreds of trillions of rupiah if he wants to boost high economic growth.
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“Around Rp. 700 trillion-Rp. 800 trillion in additional investment if you want economic growth of 6%,” he said.
To achieve this, future governments are required to be able to simplify bureaucratic procedures and regulations. This is to suppress the indicator incremental capital to output ratio (ICOR) or the amount of additional investment to produce additional income output.
As of 2023, Indonesia’s ICOR will be at 6.33. This shows that investment is not yet efficient. To encourage economic growth to 6%, the government needs to reduce ICOR to the level of 4% or 5%.
“To increase investment, the main strategy is that there must be efficiency in investment. So far, investment has been inefficient as shown by the high ICOR value,” he concluded. (E-2)
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