The post-Covid-19 global economic landscape has yielded complex challenges. Given bleaker global growth prospects, moderating commodity prices and a higher cost of borrowing, the Indonesian government took a conservative approach to fiscal policy by narrowing the budget deficit to ease the financing pressures. Meanwhile, the central bank, Bank Indonesia, implemented contractionary monetary policy by raising the reserve requirement and policy rates. Weaker global demand, along with limited policy support, contributed to a decrease in economic growth, from 5.3% in 2022 to 5.0% in 2023. The government’s conservative approach in 2023 helped produce a surplus in the primary balance, a narrower budget deficit and a lower government–debt ratio. Nonetheless, much is to be done, as more development is needed to encourage long-term growth while revenue collection has been relatively low. Improvement in tax policy and administration will be crucial to allow the government to collect more revenue, including a comprehensive review of tax incentives and exemptions. The efficacy of spending also needs to be further improved by consistently reforming energy subsidisation, reallocating spending to growth areas, better aligning local development policies with the national position, and better targeting poverty-alleviation programs.
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abstract = "The post-Covid-19 global economic landscape has yielded complex challenges. Given bleaker global growth prospects, moderating commodity prices and a higher cost of borrowing, the Indonesian government took a conservative approach to fiscal policy by narrowing the budget deficit to ease the financing pressures. Meanwhile, the central bank, Bank Indonesia, implemented contractionary monetary policy by raising the reserve requirement and policy rates. Weaker global demand, along with limited policy support, contributed to a decrease in economic growth, from 5.3% in 2022 to 5.0% in 2023. The governments conservative approach in 2023 helped produce a surplus in the primary balance, a narrower budget deficit and a lower government–debt ratio. Nonetheless, much is to be done, as more development is needed to encourage long-term growth while revenue collection has been relatively low. Improvement in tax policy and administration will be crucial to allow the government to collect more revenue, including a comprehensive review of tax incentives and exemptions. The efficacy of spending also needs to be further improved by consistently reforming energy subsidisation, reallocating spending to growth areas, better aligning local development policies with the national position, and better targeting poverty-alleviation programs.",
keywords = "fiscal policy, Indonesian economy, national budget, social protection, tax reforms", author = "Indrawati,Research output : Contribution to journal › Article › peer-review
T1 - Indonesia’s Fiscal Policy in the Aftermath of the Pandemic
AU - Indrawati, Sri Mulyani
AU - Satriawan, Elan
N1 - Publisher Copyright: © 2024 ANU Indonesia Project.
N2 - The post-Covid-19 global economic landscape has yielded complex challenges. Given bleaker global growth prospects, moderating commodity prices and a higher cost of borrowing, the Indonesian government took a conservative approach to fiscal policy by narrowing the budget deficit to ease the financing pressures. Meanwhile, the central bank, Bank Indonesia, implemented contractionary monetary policy by raising the reserve requirement and policy rates. Weaker global demand, along with limited policy support, contributed to a decrease in economic growth, from 5.3% in 2022 to 5.0% in 2023. The government’s conservative approach in 2023 helped produce a surplus in the primary balance, a narrower budget deficit and a lower government–debt ratio. Nonetheless, much is to be done, as more development is needed to encourage long-term growth while revenue collection has been relatively low. Improvement in tax policy and administration will be crucial to allow the government to collect more revenue, including a comprehensive review of tax incentives and exemptions. The efficacy of spending also needs to be further improved by consistently reforming energy subsidisation, reallocating spending to growth areas, better aligning local development policies with the national position, and better targeting poverty-alleviation programs.
AB - The post-Covid-19 global economic landscape has yielded complex challenges. Given bleaker global growth prospects, moderating commodity prices and a higher cost of borrowing, the Indonesian government took a conservative approach to fiscal policy by narrowing the budget deficit to ease the financing pressures. Meanwhile, the central bank, Bank Indonesia, implemented contractionary monetary policy by raising the reserve requirement and policy rates. Weaker global demand, along with limited policy support, contributed to a decrease in economic growth, from 5.3% in 2022 to 5.0% in 2023. The government’s conservative approach in 2023 helped produce a surplus in the primary balance, a narrower budget deficit and a lower government–debt ratio. Nonetheless, much is to be done, as more development is needed to encourage long-term growth while revenue collection has been relatively low. Improvement in tax policy and administration will be crucial to allow the government to collect more revenue, including a comprehensive review of tax incentives and exemptions. The efficacy of spending also needs to be further improved by consistently reforming energy subsidisation, reallocating spending to growth areas, better aligning local development policies with the national position, and better targeting poverty-alleviation programs.
KW - fiscal policy
KW - Indonesian economy