Jakarta: A top adviser to President Prabowo Subianto has expressed confidence that Indonesia will achieve at least 8% year-on-year economic growth in this year’s final quarter thanks to the government’s food and housing programmes.
Speaking at the Indonesia Economic Summit organised by the Indonesia Business Council (IBC) last Wednesday, Hashim Djojohadikusumo said the free nutritious-meal programme for 82 million beneficiaries would single-handedly boost gross domestic product (GDP) growth by two percentage points once it reaches full scale.
“I’m actually very optimistic that, in the last three or four months of this year, we will actually surpass 8%,” said Hashim: “It’s just basic arithmetic, basic mathematics.”
Hashim, who is also the president’s brother, went on to claim that the 2% increment was “on top of the 5.3%” growth he assumed the country would automatically achieve, based on projections from the National Planning Agency.
Indonesia’s gross domestic product (GDP) grew by a more modest 5.03% throughout last year, and the 2025 state budget plan assumes a rate of 5.2% this year.
Hashim illustrated that the free-meals programme would entail a need for “82 million eggs every day”, alongside “82 million chicken drumsticks and chicken wings every day”.
The government’s programme to build or renovate three million homes every year would add another two to 2.5 percentage points to annual GDP growth, he claimed.
The programme would only allow big property groups to take on the development of one million apartments per year in urban areas, while the other two million homes are to be built in rural regions by medium, small and micro enterprises, cooperatives and village-owned businesses.
He admitted that the bar for the programme was set high but remained bullish on its execution, noting that the Qatari government had made commitments to fund and develop three to five million units, while a private Qatari business would invest up to US$20bil to build another one million units.
“That’s just the state of Qatar by itself. The United Arab Emirates has committed to do one million and is considering more. These are just two countries, just two countries,” said Hashim, speaking in English.
“I’ve been to Beijing three times this year, and the Chinese government, the Chinese construction companies, are very, very keen to come to Indonesia. Why? Because the Chinese construction sector is depressed. They are looking for other markets, so we’ve come at the right time. Indonesia’s demand matches China’s requirement,” he added.
Hashim said GDP growth could shoot up to 9% with both the food and the housing programmes in the equation, which he claimed did not even include other big future projects in aluminium, power generation and Internet connectivity.
Economists believe Hashim’s projection is overly optimistic, specifically the expected growth impact from the free-meals programme.
BCA chief economist David Sumual told The Jakarta Post last Friday that, first and foremost, the fiscal spending for the programme was essentially just a reallocation from other government expenditures, meaning the economic effect was merely getting shifted, not amplified.
Over the past month, the government has embarked on a process of identifying and cutting a total of 250 trillion rupiah or about US$15.3bil from the budgets of government institutions to free up funds for the free meals programme.
Assuming that the programme did hike GDP growth, it would not be that significant, David forecast.
He also questioned the readiness of domestic supply chains for building three million homes, without which “there’ll be an import surge” that would drag down GDP growth.
Economist Intelligence Unit analyst Wen Chong Cheah called Hashim’s claim “overly optimistic”, since the free-meals programme would have minimal “direct effect” on GDP, notwithstanding its social impact.
“For example, a similar programme in India did not lead to a significant increase in GDP growth. Welfare programmes generally have incremental effects over years, rather than sharp GDP jumps,” Cheah told the Post last Friday.
He also noted that the expenditure for the two programmes was to be offset by spending cuts elsewhere, limiting their net impact on growth.
Cheah forecast a mere 5.1% in average annual GDP growth for the archipelago from 2025 to 2028.
Likewise, Paramadina University economist Wijayanto Samirin called Hashim’s projection overly optimistic on the same fiscal-offset argument.
He said this year’s growth could end up lower than last year’s because of weak spending power and lower commodity exports.
He warned the government not to rev up the housing programme without good planning. — The Jakarta Post/ANN
