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[News] Government Has Room To Improve Fiscal Strength
Posted at: 31 May 2019

While Jokowi won’t be inaugurated until October, he’s already set about drafting plans to spend more than $400 billion on infrastructure, such as building new power plants and airports. As much as 40% of the total is expected to be funded directly by the government, 25% through state-owned enterprises and the rest through the private sector.

The president is betting on a spending boom to lift economic growth, which hasn’t hit the 7% target he set in his first term. The trillion-dollar economy grew 5.07% in the first quarter, the slowest expansion in a year.

Jokowi has ordered his cabinet to try to stimulate the economy by boosting investment and exports. With the budget deficit forecast at 1.84% of gross domestic product — well below the 3% ceiling — the government has room to pursue more expansive fiscal policies after a year of aggressive monetary tightening.

Weaker global demand and the U.S.-China trade tensions have weighed on exports, pushing the trade deficit to its widest in at least a decade. That makes it more difficult for the government to rein in the current account shortfall from a four-year high in 2018, and means it remains reliant on foreign inflows to fund imports

With global risks rising, foreign funds have once again began dumping emerging market assets, including Indonesian stocks and bonds. Investors will be watching if Jokowi can pursue structural reforms to lure more stable foreign direct investment instead.

(source: Channel News Asia)