Indonesia has doubled wage subsidies but cancelled electricity discount as part of an economic package aimed at stimulating demand.
The Indonesian Finance Minister Sri Mulyani Indrawati revealed that the package, which includes fare subsidies as well as cash and food handouts over June and July, will cost the government 24.44 trillion rupiah (US$1.5 billion).
“State-owned companies will cover around 850 billion rupiah in costs for policies like subsidising highway toll fares, while the rest will come from the government’s coffers,” she noted.
The Indonesian government had announced last month on 24 May that it is rolling out a slew of stimulus measures to get its people to spend more in the next two months.
On 27 May, the government announced discounts on electricity bills and transportation costs as well as cash and food handouts to selected households that will begin today (5 June).
With the upcoming school holidays set to take place between 28 June and 12 July, it also revealed plans to boost domestic tourism and consumption by offering discounts on train tickets and sea transport services.
“With these economic stimuli, we hope economic growth in the second quarter can be kept close to 5%, compared to our previous forecast of a slowdown due to global conditions,” Sri Mulyani said.
The Southeast Asia’s largest economy grew 4.87% on a yearly basis in the first quarter –its weakest pace in over three years and hit by falling household spending. The forecast for the rest of the year is also clouded by a troubling global trade outlook.
According to analysts, the slew of measures may not be enough to revive sluggish domestic consumption and lift economic growth as broader moves are needed to help the country’s middle class and protect businesses from the effects of higher US tariffs.
Sri Mulyani also said that the government had decided to cancel the plan to cut some electricity tariffs by as much as 50% because the budgeting process would take too long.
Instead, she said that the budget initially allocated for the electricity discount will be directed to the Wage Subsidy Assistance programme for workers earning below 3.5 million rupiah per month, as reported by local news outlet Jakarta Globe.
It also reported that the wage subsidies will double from 150,000 rupiah a month per person to 300,000 rupiah. Almost 18 million workers will be eligible.
Source: https://sme.asia/indonesias-revised-stimulus-focuses-on-labor-cuts-energy-subsidies/