Measuring The Seriousness Of The Government To Issue Economic Stimulus Packages

Minister of Finance Sri Mulyani announced five government incentive policy packages at the Presidential Office of Jakarta, Monday (2/6/2025). (ANTARA/Andi Firdaus)

JAKARTA A number of observers have doubts about the plans for various economic stimulus initiated by the government. The stimulus package that was given as of June was even referred to as the government's "trial and error".

President Prabowo Subianto launched five government incentive packages aimed at the transportation sector to thicken social assistance. This incentive package will take effect in June 2025.

The announcement was made after the agenda of a limited meeting with relevant policy makers which was held at the Presidential Palace in Jakarta, Monday.

"Today it was decided five things about the economic policy package with the target of those who will benefit from the stimulus package," said Finance Minister Sri Mulyani at the Jakarta Presidential Office.

Executive Director of the Center of Economic and Law Studies Bhima Yudhistira proposed another incentive, namely cutting the VAT rate from 11 percent to 9 percent in June 2025.

The government provides economic stimulus to maintain purchasing power and increase domestic consumption during the June-July 2025 period, which also coincides with the momentum of school holidays. This is done to maintain economic growth in the second quarter of 2025 in the range of five percent.

In more detail, economic stimulus programs or policies in the second quarter include transportation discounts, toll tariff discounts, social assistance thickening and food assistance, wage subsidy assistance, and extension of work accident insurance discounts. Meanwhile, the electricity tariff discount that was previously to be given was canceled.

Bhima Yudhistira from Celios specifically highlighted one stimulus policy, namely wage subsidies. According to Bhima, the wage subsidy is IDR 600 thousand per month for around 17 million workers with a salary below IDR 3.5 million or UMP or City or Regency that applies and for 3.4 million honorary teachers for two months in June-July 2025 it will not have a significant effect.

"The wage subsidy is still too small, ideally 30 percent or the equivalent of 1 million for 3.5 million salary workers. The wage subsidy also needs to be balanced by controlling the prices of basic necessities and housing transportation so that the purchasing power of workers can be maintained," Bhima told VOI.

Bhima also emphasized the importance of opening jobs considering the massive termination of employment (PHK). In addition, the government is also obliged to cover informal workers who enter the wage subsidy scheme.

"Learning from COVID-19 yesterday, informal workers did not receive wage subsidies because the government is still based on BPJS Ketenagakerjaan data," said Bhima again.

Meanwhile, Director of Public Policy Celios Media Wahyudi Askar stated that six government stimulus would become a series and error. According to him, many stimulus policies made by the previous government were not effective.

"Obviously this (policy) is terrorism and error because if we look at backward policies such as pre-work, Rp42 trillion of state money runs out for pre-work and is now missing, not to mention the Free Nutrition Food (MBG) program and Village Cooperatives. What we regret is that the public's money runs out first," said the Media.

He even made an analogy of this policy, such as encouraging the oceans because it did not have a significant wasteful impact. According to the media, the only government assistance that is most effective is cash assistance through the Family Hope Program (PKH).

"Ini ada paket stimulus diskon tiket pesawat, siapa yang mau perangkat naik pesawat di tengah bayar iuran sekolah? Tidak ada," tegas Media.

"I don't agree that the state doesn't have money, the money exists, but it is shifted to MBG hundreds of trillions, to Danantara and the money is not circulating below," he added.

For this reason, according to Bhima Yudhistira, the government should issue other incentives in the form of cutting VAT rates from 11 percent to nine percent in June 2025.

He believes that the reduction in VAT tax rates from 11 percent to nine percent can boost higher economic growth because people will spend more money to buy goods and services.

Bhima encouraged the government to reflect on several other countries that had already lowered VAT rates, such as Vietnam by two percent of the decline in VAT by 2026, and Ireland, which cut post-pandemic VAT rates to stimulate the recovery of people's purchasing power. In addition, Germany also cut the regular VAT rate by three percent.

"The state income from the VAT rate reduction scheme will actually be positive because it is compensated for by other revenue increases such as corporate income tax payments, and VAT 21 employees," he concluded.