Indonesia to Tackle Import Surge and Fiscal Challenges in 2025

Indonesia’s government is taking decisive steps to address both economic and industrial challenges as it prepares for the fiscal year 2025. Trade Minister Zulkifli Hasan announced a comprehensive review of imports, targeting a variety of goods beyond textiles, including clothes, footwear, cosmetics, ceramics, and electronics. This move is part of a broader effort to protect local industries from the adverse impacts of a surge in imported goods, which has led to factory closures and layoffs.

The Trade Ministry’s investigation will examine import trends over the past three years to determine if safeguard duties or anti-dumping measures are necessary. “If import surges are killing the local industry, we are allowed to impose safeguard measures,” Hasan stated, ensuring that any actions taken will comply with World Trade Organization rules. This marks a shift from the previous week’s stance, where tariffs as high as 200% were considered, primarily targeting Chinese imports.

Simultaneously, Indonesian lawmakers have agreed on a wider target range for the 2025 budget deficit, aiming for 2.29%-2.82% of gross domestic product (GDP). This adjustment reflects a more optimistic outlook, reducing the lower end of the deficit target from an earlier estimate of 2.45% of GDP. The government plans to boost state revenues through an expanded tax base and streamlined fiscal incentives, while also restructuring energy subsidies to free up funds.

The approved fiscal targets are designed to keep the budget deficit below the legal limit of 3% of GDP, a move aimed at maintaining investor confidence. This fiscal prudence is essential as President-elect Prabowo Subianto, who will take office in October, prepares to launch new programs, including a significant US$4.3 billion free meal initiative. Lawmakers have also set a target debt ratio of 37.82%-38.71% of GDP for 2025, down from roughly 39% this year, with Prabowo planning a gradual increase in the debt-to-GDP ratio by 2% annually over his five-year term.

Indonesia’s economic strategy aims for a growth rate of 5.1%-5.5% in 2025, consistent with the nation’s average growth over the past decade. The inflation target remains at 1.5%-3.5%, with expectations of the rupiah appreciating to 15,300-15,900 per dollar from its current level above 16,000. Said Abdullah, chairman of parliament’s budget panel, emphasized the importance of providing fiscal space for the new government to implement its vision and mission.

As Southeast Asia’s largest economy, Indonesia’s dual approach of regulating imports and ensuring fiscal stability is crucial for sustainable growth and protecting domestic industries. The government’s measures reflect a careful balancing act between fostering economic development and safeguarding national interests.