Will Indonesia’s US$1.5 billion stimulus lift its economy?

Indonesia’s latest US$1.5 billion stimulus package may fall short of reviving sluggish household spending or propelling the government’s ambitious 8 per cent growth target, analysts have warned.

Southeast Asia’s biggest economy posted only a 4.87 per cent year-on-year growth in the first quarter this year. The momentum of Islam’s holy month of Ramadan and Eid al-Fitr, which fell within the period, could not lift public spending, an anomaly that has sparked concerns among officials.

In response, President Prabowo Subianto’s administration earlier this month rolled out a 24.4 trillion rupiah (US$1.5 billion) stimulus package aimed at lifting consumer spending during the school holidays in June and July.

“The president decided to launch the stimulus package to maintain the momentum of economic growth while strengthening domestic resilience to global pressures,” finance minister Sri Mulyani Indrawati said on June 2. “We hope that in the second quarter, economic growth can be close to 5 per cent.”

The government would finance 23.59 trillion rupiah of the two-month package, with the remainder contributed by the private sector, she added.