Jakarta – The government has taken a moderate approach to its spending next year amid global uncertainty caused by the inflation crisis and Russia-Ukraine War.
President Joko "Jokowi" Widodo announced on Tuesday the 2023 state budget plan during the annual speech at the House of Representatives, revealing that the government has allocated Rp 3 quadrillion in expenditure (US$205.8 billion), about 2 percent lower than this year's revised budget.
While aiming to return the budget deficit to below 3 percent, as mandated by law, the government also seems cautious about relying on debt and export revenue to finance the budget.
The debt issuance will decrease by 26 percent to Rp 696.3 trillion next year to prevent a heavier burden on the budget to anticipate the potential depreciation of the rupiah.
The Indonesian Crude Price (ICP), an oil price benchmark used for budget calculations, is set at US$90 per barrel for 2023, which is lower compared with this year's revised assumption of above $100, allowing fuel subsidy spending to fall by 33 percent to Rp 336.7 trillion.
The moderate approach is a positive gesture from the government, showing that it is being very careful, or "vigilant" as President Jokowi puts it, despite the fact Indonesia's economy remains strong with the support of a record trade surplus and export revenue this year.
International agencies like the International Monetary Fund and Asian Development Bank have released an optimistic outlook for the country amid worsening economic conditions or even recession in Europe and the United States.
While other countries are currently worried about getting enough money as well as food and energy supplies, Indonesia's problem, at least for now, is how to spend wisely.
But there are some reasons not to take things for granted. Indonesia, for instance, is still very dependent on oil imports as well as food like wheat and soy, also raw materials for industries.
Although the government still can benefit from export revenue from commodities like coal or palm oil, the economy's reliance on these imports will still pose a problem should the global supply disruption get worse than it is now.
Less money allocated for the energy subsidy may bring the government to the very policy that it has tried to avoid for months: raising fuel prices across the board – including the subsidized ones. If global energy prices remain persistently high, there is also a chance that the government will scrap subsidies altogether.
The government will also rely more on the central bank if inflation soars unexpectedly, and it will be hard for Bank Indonesia to keep its current dovish policies.
All hands are pretty much on deck now to brace for more global uncertainty. But we also need to remember that there is much room for the country's economy to grow. And while we are ready for the storms, it is still OK to enjoy the sailing