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On Thursday, 7th September 2017, EY together with Perbanas held a business forum luncheon “Political Economy of APBN: Overcoming Economic Disparity” at Financial Club Jakarta, Graha CIMB Niaga.
Prof. Suahasil Nazara, Chairman of Fiscal Policy Agency in the Ministry of Finance of the Republic of Indonesia was the speaker with Mr. Wijayanto Samirin, MPP, Special Staff of Vice President of Indonesia for Economic and Finance as the moderator.
Politics and Economics: Prof. Suahasil Nazara began his speech by explaining the reciprocal relationship between politics and the economic policy. Politics influence economic performance as economic policy influences political performance. Necessary factors of economic performance are the political stability and rule of law. Unlike monetary policy, fiscal policy is in the domain of executive power. APBN is a result of collaborations between Governance, parliamentary process which include politics, and technocratic.
Fiscal Policy: He emphasized that the objective of fiscal policy is to overcome disparity. He provided data about economic growth achievement in Semester 1 2017 and the impact on poverty and inequality. Based on the data, economic growth has not been equitably enjoyed among income groups and regions. He, then explained the strategic issues of poverty and equality. He also presented the plan for APBN 2018. The government’s priority sector in 2018 is in education, infrastructure, and health. In the other hand, the allocation for energy subsidy that was highly prioritized in several years before has been decreased.
Demography: Indonesia has a potential to be the 8th largest economy in the world with US$ 29,300 income per capita in 2045. This condition can be achieved if Indonesia takes advantage of demographic bonus with 52% projected working age population. This is the reason why the government increase budget allocation in education and health.
Stunting: But, there is a serious issue related to the above projection. Government is concerned about the phenomenon of stunting that is hitting 37% of Indonesian kids. Children suffering from stunting have a lower height from the standard for their age based on WHO MGRS (Multicare Growth Reference Study). As a result, children with stunting have decreased cognitive function, immune system, metabolic system disorders, and degenerative disease risk in the long-term. And they cannot be productive when they grow up.
Debt: Professor also briefly mentioned about Indonesia’s debt. It is true that Indonesia’s debt keeps increasing. He explained that Indonesia had a relatively low public debt compared to several developing and developed countries. He stated that no need to worry about debt. The government is maintaining deficit and debt ratio at manageable levels.
The event ended after Q&A session.