The Indonesian government, in a concerted effort to uphold and stimulate economic growth throughout the remainder of 2023, has devised a set of strategic policy measures. This strategic response is prompted by the ever-shifting dynamics of both the global and local economic landscapes.
In the third quarter of this year, Indonesia’s economic growth registered at 4.94% annually (YoY), signaling positive growth albeit at a slower pace compared to the same period in 2022, which recorded 5.73%. Recognizing this favorable trend, the government is proactively preparing a comprehensive policy package. This policy package encompasses three pivotal policies, as summarized from cnbcindonesia, the Reinforcement of Social Assistance to safeguard the purchasing power of the impoverished and vulnerable, the Acceleration of the Disbursement of the KUR Program, and the Fortification of the Housing Sector.
Policy Package 1: Reinforcement of Social Assistance
The initial policy package underscores the government’s commitment to safeguarding the purchasing power of the economically disadvantaged. This involves the provision of an additional 10 kilograms of rice per Beneficiary Family for one month (December 2023) to 21.3 million recipients, encompassing PKH and/or Sembako beneficiaries. This initiative incurs a budget of Rp2.67 trillion. Additionally, a Direct Cash Assistance (BLT) El Nino, amounting to Rp200,000 per month for two months (November – December 2023), is allocated to 18.8 million Sembako recipients, with a budget of Rp7.52 trillion.
As widely acknowledged, Indonesia’s economic foundation primarily rests on the consumption patterns of the upper-middle class. Surprisingly, only 17% of the lower-middle class, who should be eligible for various social assistance programs, contributes to Indonesia’s economic growth. In stark contrast, the upper-middle and upper classes collectively contribute 83% to economic growth.
Policy Package 2: Acceleration of the Disbursement of the KUR Program
This policy is designed to fortify Small and Medium Enterprises (SMEs) amidst the backdrop of escalating interest rates. The expedited disbursement of the KUR program is facilitated through weekend banking, aiming to enhance the absorption and optimize the utilization of KUR disbursements. According to Ministry of Finance records, the realization of KUR in September 2023, totaling Rp177.5 trillion, is anticipated to reach Rp297 trillion by the end of 2023.
The government notes that the realization of KUR disbursement until October 31, 2023, stands at Rp199.88 trillion, constituting 67.30% of the target of Rp297 trillion. The impediment to the smooth disbursement of KUR has primarily been attributed to the lack of enthusiasm from SMEs, plagued by uncertainties regarding market access and sales prospects.
Policy Package 3: Fortification of the Housing Sector
This policy is a strategic intervention, taking into account the substantial multiplier effect of the housing sector. As of September 2023, the housing sector has exhibited a slowdown, necessitating interventions to rekindle its performance and contribute to economic stability amid global slowdown risks.
Support for the housing sector is allocated for commercial houses, Low-Income Community (MBR) houses, and houses for the poor. The estimated budget requirement for this sector is Rp3.7 trillion for the years 2023 and 2024. Pertinently, the support for commercial houses involves providing the Value Added Tax (VAT) DTP for houses with a maximum selling price of Rp5 billion. The government will cover the Basic Taxation Value (DPP) up to Rp2 billion for 14 months (November 2023 to December 2024).
The VAT-DTP is dispensed with a stipulated schedule: from November 2023 to June 2024, a 100% VAT-DTP is applied, and from July 2024 to December 2024, a 50% VAT-DTP is implemented.
These policy packages, meticulously outlined by the government, are envisioned to establish a robust and sustainable foundation for economic growth. The strategic implementation of these measures aims to create a stable, inclusive, and sustainable economic environment, positively contributing to Indonesia’s economic trajectory in 2023 and beyond.
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