JAKARTA, May 20 (Reuters) – Indonesia’s President Prabowo Subianto announced on Wednesday a fiscal deficit target range of 1.8% to 2.4% of gross domestic product for next year, with the aim of achieving economic growth as high as 6.5%.
In a rare address to parliament, Prabowo also stressed the importance of ensuring Indonesia’s vast natural resources bring benefit to its 280 million people, adding they were enough to provide welfare for all if properly managed.
“I’m sure every patriot will support this – the earth, water, and all the resources within must be enjoyed by all Indonesians,” Prabowo said.
Prabowo’s target for the 2027 fiscal deficit is sharply lower than the finance ministry’s outlook for this year of 2.9% of GDP as of April, which has factored in the impacts of the Middle East conflict.
The inflation target for 2027 would be in a range of 1.5% to 3.5%, he said, with the target for economic growth at between 5.8% and 6.5%.
Prabowo’s remarks on resources come as Indonesia, a global commodities powerhouse and top producer or exporter of nickel, palm oil, tin and coal, among others, prepares to establish a body to manage key commodities to try to increase state revenue, sources said on Wednesday.
Concern about the plan has spooked the market, with Jakarta’s main stock index shedding 3.5% on Tuesday.
INCREASED SCRUTINY
Prabowo’s address comes amid increased scrutiny of Indonesia’s $1.4 trillion economy, with Moody’s and Fitch earlier this year cutting their respective credit rating outlooks for the country, a G20 economy, to negative from stable, citing reduced policymaking credibility and predictability.
The moves followed transparency concerns flagged in January by global index provider MSCI and its warning that Indonesia could potentially be downgraded to frontier status, which triggered a market rout of more than $120 billion
Indonesia’s rupiah has sunk to a series of record lows despite interventions by the central bank, with the latest slide on Wednesday.
The target for the average rupiah exchange rate for 2027 was 16,800 to 17,500 per dollar, Prabowo said.
Prabowo also said state expenditure was targeted at 13.62% to 14.80% of GDP and state revenue at 11.82% to 12.40% of GDP.
(Reporting by Reuters Staff; Writing by Martin Petty; Editing by David Stanway)
