IDEAS Advises President-Elect Prabowo Subianto to Focus on State Budget Amid Global Economic Instability
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26 June 2024 09:31 WIB
TEMPO.CO, Jakarta - The Director of the Institute for Demographic and Poverty Studies (IDEAS), Yusuf Wibisono, advised President-elect Prabowo Subianto to focus the State Budget (APBN) on a counter-cycle policy as the global economy remains unstable.
"The limited State Budget should be focused on as a counter-cycle policy," said Yusuf when contacted via a messaging application, quoted Tuesday, June 25, 2024.
Yusuf explained the counter-cycle policy is aimed at fighting the weakening economy by boosting government spending which has the biggest multiplier effect on the economy.
With a low and stagnant tax ratio for the last decade, Yusuf believes that the State Budget does not have the luxury of fiscal space to accommodate excessive populist programs. The government's limited budget, he said, should strive to fund spending items with lasting economic impacts.
Moreover, The current State Budget has been burdened by non-discretionary spending such as salaries for civil servants, interest payments, and transfers to the regions.
According to Yusuf, the largest government expenditure is employee spending which comprises around 21.3 percent, followed by goods spending with 21.1 percent and debt interest payment with 17.7 percent of the total government spending.
Overall, only 40 percent of the government expenditure remains for infrastructure and social spending. "The government has never been able to reduce discretionary spending," he said.
The remaining fiscal space for discretionary spending, Yusuf said, has mostly been used for infrastructure development, energy subsidies, energy compensation, as well as social assistance.
The World Bank previously estimated that global economic growth would stabilize at 2.6 percent this year. This global economic growth occurred amidst turbulent geopolitical tensions and high interest rates.
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https://bisnis.tempo.co/read/1884111/prabowo-diminta-fokuskan-apbn-untuk-counter-cycle-policy-buntut-situasi-ekonomi-global
