Achieving the target growth will be challenging amid the looming uncertainties in the global economic landscape.
Furthermore, public consumption, which the government is still trying to recover, and the condition of the domestic industry, which is being tested by rampant layoffs, are adding to the burden on the current administration as it works to achieve the target.
However, the government is continuing to try and accelerate economic growth gradually, starting by laying down a growth target of 5.2 percent in the 2025 state budget.
During a ministerial coordination meeting on February 27, 2025, Coordinating Minister for Economic Affairs Airlangga Hartarto said that economic growth acceleration is being pursued through several strategic policies.
The policies range from distributing social assistance to providing special stimulus during Ramadan and Eid al-Fitr.
"These policies are designed to maintain the momentum of economic growth and ensure macroeconomic stability," he added.
In general, there are several cyclical phenomena on the supply and demand side that will drive economic growth in the first quarter of 2025.
The government is currently focusing on the Ramadan and Eid al-Fitr period, which always drives economic growth, both in terms of supply and demand.
On the supply side, non-oil and gas industry sectors such as the food and beverage industry and textile industry are predicted to increase production to meet the surge in demand. The wholesale and retail trade sector is also expected to grow due to the domestic supply boost.
On the demand side, household consumption during Ramadan will be the main driving force of the economy.
The provision of Eid allowance to civil servants and private employees is also expected to boost the purchasing power of the community. Apart from that, electricity incentives are being provided during Ramadan to maintain purchasing power.
Social aid, Eid allowance optimization
To boost public consumption, the government is optimizing the distribution of social assistance – for instance, through the Family Hope Program (PKH) – and the absorption of farmers' paddy.
The government has allocated Rp150 trillion (around USD9.17 billion) for the phase I disbursement of PKH in 2025. The disbursement will be carried out through state-owned postal company PT Pos Indonesia and state-owned banks.
This is aimed at ensuring the assistance is provided accurately and supports the purchasing power of the lower middle-income group.
Apart from that, the government has also provided an additional budget of Rp16.6 trillion to the State Logistics Agency (Bulog) to absorb three million tons of rice until April 2025.
"The measure aims to maintain the stability of rice prices, ensure the availability of national food stocks, and support the distribution of food aid to people in need," the minister explained.
"The program is expected to help stabilize food prices and bolster people's purchasing power during the Ramadan and Eid period," he added.
The provision of Eid allowance to civil servants is expected to be carried out three weeks before Eid al-Fitr at the earliest, and for private employees, one week before at the latest.
The acceleration of Eid allowance provision to civil servants with a budget of Rp50 trillion is aimed at significantly improving the community's purchasing power, bolstering domestic consumption, and stimulating economic circulation in various sectors, especially trade and services.
Ramadan and Eid stimuli
At a ministerial coordination meeting on February 27, the government prepared several stimulus policies for Nyepi, Ramadan, and Eid al-Fitr.
First, the government decided to re-implement airfare discounts. Discounts on domestic economy class flight tickets will be provided through the government-borne VAT incentive of 6 percent, with an estimated ticket price reduction of 13.2–14 percent, which will be valid from March 25 to April 7.
The program is aimed at supporting the movement of around 180 million people, including 110 million tourists, during the Eid period.
Second, it set a toll road discount of 20 percent for long-distance travel during the Eid al-Fitr homecoming exodus. The policy is expected to curb transportation costs and make the distribution of goods and services smoother.
The discount will be valid at the main toll roads on Eid exodus routes. The government will carry out intensive coordination to ensure smooth traffic flow, including providing adequate rest areas and information services to homebound travelers.
Third, the government decided to launch shopping discount programs, such as the Friday Mubarak Program from February 28 to March 28, at various retail stores under the Indonesian Retailers Association (Aprindo).
These include bazaars of micro, small, and medium enterprises (MSMEs) for staple goods and various offers with a transaction target of up to Rp77 trillion.
Fourth, the government decided to implement the Eid Homecoming Tourism Program, under which it will integrate tourism programs with Eid al-Fitr moments through the promotion of local tourist destinations, provision of affordable tourism packages, and improvement of tourism facilities on the main homecoming exodus routes.
Fifth, the government opted to conduct affordable food market operations involving various parties, including Bulog, from February 24 to March 29 to keep the prices of staple goods stable during Ramadan and Eid al-Fitr.
Minister Hartarto expressed the hope that the step would help maintain food availability, curb inflation, and protect the community's purchasing power.
The government has also readied and applied economic stimulus packages to support the 5.2 percent economic growth target this year.
First, it provided electricity discounts in January and February 2025 to reduce people's expenses.
Second, it is offering to bear the VAT (value-added tax) on the purchase of properties and electric vehicles (EVs).
Third, it is bearing the sales tax on luxury goods for the purchases of EVs and hybrid vehicles, which is expected to accelerate the adoption of environmentally friendly vehicles and bolster the national automotive industry.
Fourth, it is bearing the income tax burden of labor-intensive sectors to maintain the competitiveness of domestic industries. The policy is expected to encourage the creation of new jobs, increase exports, and maintain the stability of the industrial sector amid global economic uncertainty.
Fifth, the government has provided tax incentives for bullion business activities.
The synchronization of tax regulations, especially Article 22 Income Tax on sales transactions between gold producers and bullion banks, is expected to increase the attractiveness of the bullion bank business ecosystem and support its development.
Furthermore, Minister Hartarto said that the government will continue to optimize the disbursement of the low-interest People's Business Credit (KUR) to strengthen the competitiveness of MSMEs as well as boost domestic consumption and investment to achieve the 2025 economic growth target.
In the period from January 2025 to February 21, KUR disbursements reached Rp28.73 trillion, or 9.99 percent of the target of Rp287.47 trillion set for the year. The loans were provided to 531,148 debtors. The government is targeting KUR disbursements of Rp55.4 trillion by March 31.
The KUR disbursements are focused on priority sectors that have a major impact on the economy, including agriculture, trade, and manufacturing, as well as supporting the digital-based economic transformation of MSMEs.
The stimuli are expected to support continuous national economic growth.
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Editor: Rahmad Nasution
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