Indonesia’s President Assures Rupiah Depreciation Is Safe and Proposes Tax Incentives for Economic Growth
Indonesia’s President Joko Widodo reassured investors that the recent depreciation of the rupiah against the dollar is still manageable for the country’s economy. He emphasized that the depreciation rate is safe for the real sector, financial sector, and inflation targets. To stimulate economic growth, the government is working on drafting tax incentives. However, President Widodo cautioned about potential risks such as soaring oil prices due to the Middle East conflict and capital outflows related to US monetary tightening.
Rupiah Depreciation and Interest Rate Hike
Since early September, the rupiah has faced downward pressure and depreciated by up to 4.7% against the dollar. This decline has led Indonesia’s central bank to unexpectedly raise interest rates to prevent further depreciation. Economists suggest that additional rate hikes may be necessary if the currency continues to weaken. Despite a slight strengthening of the rupiah on Tuesday, President Widodo emphasized the need for long-term preparedness and resilience.
Government’s Financial Stability and Tax Incentives
President Widodo assured that the state budget has the endurance to withstand shocks until 2024, with the finance ministry holding a significant amount of cash reserves. Additionally, the government is planning tax incentives, particularly for the property sector. These incentives may include the removal of value-added tax for house purchases, aimed at boosting growth and investment in the sector.
Measures to Ensure Affordable Rice Prices
The government also intends to implement measures to keep rice prices affordable, as it is an essential food staple. Details of this policy will be made public soon. In line with this, Indonesia plans to import 1.5 million metric tons of rice in 2023, in addition to a previous import quota of 2.3 million tons issued earlier this year. The objective is to replenish government rice reserves and stabilize rising prices.
Efforts to Maintain Low Inflation and Support Economic Growth
The Finance Minister, Sri Mulyani Indrawati, announced the government’s commitment to implementing policy packages that aim to keep inflation low, protect people’s purchasing power, and support economic growth. In September, the headline inflation rate was within the target range set by Bank Indonesia, which is 2% to 4%.
The Indonesian government, under President Widodo’s leadership, is taking proactive measures to address economic challenges and maintain stability. With tax incentives and efforts to control inflation, the government aims to stimulate economic growth and ensure the well-being of its citizens.
