Arnoldus Kristianus, Jakarta – The Indonesian government is set to ramp up social assistance and the Free Nutritious Meals (MBG) initiative to boost economic growth after first-quarter GDP expansion fell short of expectations.
Economic growth in Q1 2025 reached just 4.87 percent, trailing the full-year target of 5.2 percent. In response, Chief Economic Affairs Airlangga Hartarto said the government is focusing on programs with strong multiplier effects.
"We hope the MBG program can be expanded so its impact on the national economy becomes more visible," Airlangga told reporters at his office on Monday.
Since early January, Indonesia has been rolling out nutrient-rich meals to schoolchildren and pregnant women to fight malnutrition. The program now feeds around 3.4 million people daily, and Prabowo is confident it will reach the target of 82.9 million by the end of November.
To support the scale-up, the government has raised the annual budget from Rp 71 trillion ($4.3 billion) to Rp 171 trillion. As of April 29, the Finance Ministry reported that Rp 2.3 trillion had been spent on the program.
The government is still assessing which sectors may be eligible for additional stimulus this year. While details remain scarce, Airlangga said the food and beverage industry and the agriculture sector showed double-digit growth in Q1 and may receive support.
Indonesia's economic performance continues to be influenced by global headwinds, he added. Budget efficiency measures have also constrained government spending in early 2025, dampening domestic growth.
"The global economy is expected to contract, and we also deferred some government expenditures to Q2," Airlangga said.
Business leaders say more aggressive policy steps are needed. Indonesian Employers Association (Apindo) economic policy analyst Ajib Hamdani warned that without breakthroughs, the economy is unlikely to exceed 5 percent growth for the year.
"This is a warning sign. If we're starting the year below 5 percent, hitting the annual growth target will be extremely difficult," Ajib cautioned.
He cited multiple drag factors: weak consumer purchasing power amid ongoing layoffs, as over 40,000 job losses have been recorded this year; underwhelming tax revenue; and lackluster investment. Tax collections stood at just 14.7 percent of the annual target by March, well below the ideal 20 percent. Newly minted state investment fund Danantara has also reportedly reduced non-tax revenue (PNBP) by taking state enterprises' dividends to reinvest, further straining the budget.
"A significant policy shift is essential for aggregate growth to reach at least the psychological threshold of 5 percent by year-end," Ajib said.
Others warn of more persistent structural challenges. Andalas University economist Syafruddin Karimi said there has been little sign of decisive policy intervention. Instead of cushioning the economy, state spending is being tightly restrained.
"This reflects weak fiscal responsiveness amid a slowdown and minimal support for the real sector," Syafruddin said Monday.
According to the Central Statistics Agency (BPS), household consumption grew 4.89 percent and contributed 54.53 percent to Q1 GDP. Investment rose just 2.12 percent, accounting for 28.03 percent. Export growth was even more modest, at 1.38 percent, contributing 22.3 percent.
Syafruddin stressed that household purchasing power is the main anchor of economic resilience. As exports and investment falter, domestic consumption remains the primary growth engine. However, rising food prices, tax burdens, and inadequate safety nets could erode household resilience.
"Strengthening domestic consumption must be the top priority in national economic policy," he said.
He urged the government to target middle- and low-income households with direct incentives, expand productive social assistance, and ensure food and energy price stability. He also called for a shift from an overreliance on capital-intensive investment and raw material exports toward policies centered on domestic demand and household welfare.
"Households are not just consumers, they are the main drivers of the national economy. If they survive and grow, so will Indonesia, regardless of global turbulence," Syafruddin concluded.