Indonesia president proposes $178 billion budget for 2020 with focus on education

JAKARTA (Reuters) - Indonesian President Joko Widodo on Friday proposed a 2,528.8 trillion rupiah ($177.56 billion) budget to parliament for 2020, focusing spending on human resources, which was central in his re-election campaign.

Indonesia's President Joko Widodo and Vice President Jusuf Kalla depart after the president's address ahead of Independence Day at the parliament building in Jakarta, Indonesia, August 16, 2019. REUTERS/Willy Kurniawan

The 2020 budget proposals set a target of 5.3% growth in gross domestic product (GDP), the same as this year’s, although officials have often said 2019 growth would probably range from 5.1% to 5.2%.

The proposed budget is 3% bigger than 2019’s plans, but about 8% larger than the latest government estimate of what Jakarta will actually spend this year.

It will fund the president’s programs in the first year of his second five-year term, which officially begins in October.

“The 2020 state budget policy is designed to be expansive, but to remain targeted and measured,” Widodo told parliament.

To fund his budget, Widodo proposed to set a target of 2,221.5 trillion rupiah of state revenue. That brings the fiscal deficit in his budget proposals to 1.76% of GDP, which he said gave room to anticipate global uncertainties.

Juniman, chief economist of Maybank Indonesia, said Widodo’s GDP growth assumption, which is used as the basis of the government’s tax revenue target, is unattainable.

“I’m pessimistic the 5.3% growth can be achieved. Given the gloomy global condition and its slowdown trend this year and next, it will be hard for any emerging market to grow faster than this year,” said Juniman, who uses one name, like many Indonesians.

He gave a 5% growth outlook for 2019 and 2020.

Though the president’s GDP growth target was “slightly optimistic”, the tax target was “cautiously realistic”, said Bank Danamon economist Wisnu Wardana.

While Widodo promised to keep building infrastructure in 2020, the budget’s main theme was improving human resources, with the president pledging to “answer to our demographic challenges”.

Earlier on Friday, Widodo told parliament raising the quality of the labor market in his second term was key to reaping the benefit of a demographic dividend - a time when the number of people of working age exceeds those of non-working-age.

The government proposed to spend 505.8 trillion rupiah ($35.51 billion) for education in 2020, up 30% from 2015, to improve basic education as well as provide financing for 818,000 students to go to universities, Widodo said.

It would also use the budget to provide training for what Widodo called “emerging skills”, such as coding, data analytics, graphic design and even training to become a coffee barista.

The budget proposals also assumed an inflation rate of 3.1%, a yearly average rupiah exchange rate of 14,400 to the dollar, a 5.4% average rate for 3-month treasury bills and an average crude oil price of $65 a barrel, Widodo said.

Parliament typically takes until October to approve the government’s budget proposals.

(This story corrects 13th paragraph to say education spending up from 2015, not this year)

Additional reporting by Agustinus Beo Da Costa and Fransiska Nangoy; Writing by Gayatri Suroyo; Editing by Kim Coghill and Clarence Fernandez