Jakarta: Minister of Finance Sri Mulyani Indrawati provided information on basic assumptions in the Macro Assumption Framework and Fiscal Policy Principles of Draft State Budget Fiscal Year 2020 during a working meeting with the House of Representatives (DPR) Commission XI on Thursday.
There are four challenges mentioned by the Minister of Finance. First, the output gap between supply and demand is getting smaller. Second, changes in demography. Third, the trap to be a middle income trap country, and fourth is structural change.
"Projections for 2030 population numbers above 60 years old will increase from 7% to 13%. Urbanization will also continue. This is a challenge for food security and infrastructure. The increasing consequences of the middle income class will affect demand and the level of mobility," the Ministry of Finance's website quoted the former World Bank managing director as saying.
The meeting was also attended by Head of National Development Planning Agency Bambang Brodjonegoro, Governor of Bank Indonesia (BI) Perry Wardjiyo, Chairman of the Board of Commissioners of the Financial Services Authority (DK OJK) Wimboh Santoso, and Head of the Statistics Indonesia (BPS) Suhariyanto.
In addition to domestic challenges, global economic conditions also have an impact on macro assumption. Challenges that still occur include trade wars and protectionism and fluctuations in commodity prices. This, according to her will be able to influence tax revenues as well as Non-Tax Revenue (PNBP) of Natural Resources (SDA) due to the decline in Indonesia Crude Price (ICP), exchange rates, and commodity prices.
Thus, the fiscal 2020 strategy that set is expansive but still focus and measurable. The tax ratio will range from 11.8% to 12.4% of Gross Domestic Product (GDP), deficit of 1.52% to 1.75%, primary balance 0.0% to 0.2%, and debt ratio 29, 4% to 30.1% of GDP.
The presentation was closed with a request for approval of the macroeconomic assumption by the Minister of Finance, namely economic growth at the rate of 5.3% to 5.6%, inflation 2.0% to 4.0%, interest rates on Treasury Bills (SPN) 3 months 5.0 % to 5.6%, and exchange rates in the range of 14,000 to 15,000.
"Our deficit is set lower because we see volatility. Therefore, we want to be more prudent," she said.
In the meantime, solid national economic growth was recorded at 5.07 % (yoy) in the first quarter of 2019, pointing to maintained domestic economic performance despite retreating from 5.18 % (yoy) in the fourth quarter of 2018.
Seasonal factors at the beginning of the year as well as the impact of weaker-than-expected global economic gains contributed to the moderate economic downturn in Indonesia.
Economic growth in the first quarter of 2019 was primarily driven by domestic demand on the back of consumption by non-profit institutions serving households (NPISH) and households.
NPISH consumption growth accelerated to 16.93 % (yoy) in the reporting period from 10.79 % (yoy) in the three months to December 2018, buoyed by spending on preparations for the 2019 General Election.
Household consumption also remained solid as a consequence of controlled inflation, rising incomes and higher consumer confidence, notwithstanding slight moderation from 5.08 % (yoy) to 5.01 % (yoy) in the first quarter of 2019.