Enrico Tanuwidjaja, Jakarta – Valentine's Day this year will take on new significance for Indonesians, as they head to the polls on Feb 14 to determine who replaces the popular President Joko Widodo.
Mr Widodo is ineligible to run for a third term due to constitutional term limits, and the Indonesians will be looking at one of three candidates to bring a fresh vision for their nation.
The three presidential candidates are not newcomers in Indonesian politics. Mr Ganjar Pranowo is a senior figure of the ruling Indonesian Democratic Party of Struggle (PDI-P) whose last political post was as the governor of Central Java. Mr Prabowo Subianto is the chairman of the Gerindra party and also Indonesia's defence minister. Meanwhile, independent candidate Mr Anies Baswedan was formerly the governor of Jakarta.
To woo voters, all the candidates have unveiled comprehensive social and economic plans. While Indonesians will no doubt benefit, these programmes will cost between 200 trillion rupiah and 500 trillion rupiah (US$12.8 billion and US$32 billion) annually, potentially blowing holes through the country's already-stressed budget and pushing it closer by day to the fiscal deficit cap, set at 3 per cent of gross domestic product.
The candidates and their plans
Mr Ganjar and his vice-presidential running mate Dr Mahfud MD emphasise maritime development and environmental sustainability. Their vision focuses on the development of science and technology.
They are proposing 21 programmes for their five years in office, estimated at 2.5 quadrillion rupiah or 500 trillion rupiah per year. Their programmes include building 10 million housing units with cheap financing, increasing teacher salaries and subsidising education for 12 years or until college graduation. The pair claims that the 500 trillion rupiah annual budget to finance the 21 programmes will be more effective and impactful than individual programmes targeting only certain groups.
Meanwhile, Mr Prabowo and his running mate Mr Gibran Rakabuming Raka are targeting long-term development with the vision Bersama Indonesia Maju, Menuju Indonesia Emas 2045 (Advancing Indonesia Together, Towards a Golden Indonesia 2045).
They are offering concrete programmes that aim to improve people's immediate welfare, such as free lunches and milk for pregnant women and students. Their focus is also on sustainable and comprehensive development, highlighting aspects such as education, health, and poverty eradication.
The duo's onus will fall on budget reallocation, or possibly raising new sources of revenue, in order to finance the free meal programme and other social initiatives. The free lunch and milk programme will cost at least 1 trillion rupiah every day for more than 82 million recipients.
Members of their campaign team say that the budget for this initiative could cost as much as 400 trillion rupiah annually, or more than half of the total budget allocated in 2020 to handle COVID-19.
On their part, Mr Anies and his running mate Mr Muhaimin Iskandar tout a vision of A Prosperous Indonesia for All, emphasising equitable prosperity and equal access to public services.
Their plans include the Bansos Plus (Social Assistance Plus) programme, a drive to make 40 cities as successful as Jakarta, as well as funds of up to 5 billion rupiah for each village in the country. These bold political promises will lead to a large increase in the fiscal deficit. The total funds allocated to villages, for instance, will double from 70 trillion rupiah to 150 trillion rupiah annually.
In addition, they've promised to offer an allowance programme for pregnant women, which will require more than 40 trillion rupiah in additional social safety spending in a year. Mr Anies and Mr Muhaimin's proposals will cost at least 200 trillion rupiah annually.
Financing candidates' programmes
The programmes promoted by candidates can potentially be overwhelming for Indonesia's fiscal balance.
Indonesia ran large fiscal deficits in 2020 and 2021 as the government navigated the COVID-19 pandemic. The country has a legal budget deficit ceiling of 3 per cent of GDP but it was waived for the pandemic years, leading to deficits of 6.14 per cent in 2020 and 4.65 per cent in 2021.
These were the only years that Indonesia broke the 3 per cent fiscal deficit limit, since the Asian Financial Crisis of the late 1990s.
The deficits have been coming down since the pandemic, hitting 2.35 per cent of GDP in 2022 and 1.65 per cent last year, or about 347.6 trillion rupiah.
However, the programmes suggested by the three presidential candidates will put more pressure on the country's fiscal position going forward.
Adding anywhere between 200 trillion rupiah and 500 trillion rupiah – and perhaps even more – to annual expenditure runs the risks of pushing the deficit too close to breaking the 3 per cent ceiling, and could force the winning candidate to scale back on certain campaign promises.
As in all things in economics, a balance is nonetheless needed. This is because government spending also drives economic growth.
While the principle of prudence is a virtue, sometimes a tight budget comes at the expense of sub-par growth. Ideally, Indonesia could consider allowing its fiscal deficit to average 3 per cent during a given five-year term of government. This will allow economic growth to be boosted closer or beyond its potential, especially so during the earlier years of each new government.
Economy in medium to long term
As it stands, the candidates are optimistic that their policies will boost economic growth.
The annual GDP growth of 5.5 per cent to 6.5 per cent as targeted by Mr Anies for the 2025 to 2029 period is considered more realistic than the 6 per cent to 7 per cent target of Mr Prabowo and the 7.5 per cent to 8 per cent target of Mr Ganjar.
With historical precedence, a more realistic growth potential for Indonesia – based on its performance in the last decade – should be somewhere between 5.5 per cent and 6.0 per cent, especially since momentum seems to have stagnated after growing 6 per cent in 2012.
Global economic uncertainty, sluggish consumption and the low manufacturing capacity are some of the reasons why a higher growth target is difficult to achieve. These all call for a strategic structural transformation in the areas of improving overall productivity, revamping investment incentives, and prioritising fiscal expenditure in sectors that can bring about higher fiscal multipliers to the overall economy.
Nonetheless, it goes without saying that whoever is elected the new leader would want to see a progressive Indonesia with a stable and stronger economy.
The country's long-term prospects are brighter than ever, with its young, digitally savvy population, abundance of natural resources, growing consumer spending and strategic location at the heart of Southeast Asia.
Indonesia gets to choose from three suitors on Valentine's Day. We are confident that it will be a happy marriage, whomever she chooses.
[Enrico Tanuwidjaja is ASEAN economist at UOB. His coverage focuses on Indonesia and Thailand.]