MBG Program Projection Indef Increases GDP by 0.17 Percent in 2040

Illustration (Photo: ANTARA)

JAKARTA - The Institute for Development of Economics and Finance (Indef) said that the Free Nutritious Meal (MBG) Program has the potential to contribute to an increase in the national Gross Domestic Product (GDP) by 0.15 percent to 0.17 percent in 2040.

Head of the Center for Macroeconomics and Finance at Indef M Rizal Taufikurahman said that the projection was the result of research and analysis using the Overlapping Generation Indonesia (OG IDN) model.

"GDP or gross domestic product (GDP) increased moderately with a peak of 0.15 to 0.17 percent in the early 2040s," said M Rizal Taufikurahman as reported by ANTARA, Thursday, January 8.

The increase in GDP was driven by the gradual increase in labor productivity as the health conditions of the program beneficiaries improved as they entered the working age thanks to the nutritional fulfillment of the MBG program during school.

However, he stated that there was a potential decline in the labor market of 0.05 percent to 0.07 percent, the labor supply of less than 0.06 percent, and real wages of 0.6 percent.

However, Rizal assessed that this was not a disincentive to work, but was an impact of productivity efficiency so that labor could produce the same or greater output (work results) with a shorter working period.

"This decline is a reflection of the income effect, where increased well-being makes it more likely that households reduce working hours without reducing utility, assuming this is formal labor," he said.

"For this reason, on the whole, MBG does not weaken the labor market, and this is evidenced by the absorption of the number of workers, but increases efficiency through the improvement of the quality of human capital (resources)," continued Rizal.

Apart from the impact on labor productivity, he also highlighted the impact of MBG on intergenerational welfare, especially in the context of household consumption.

He said that the improvement in health resulting from better nutritional intake would correlate positively with the consumption patterns of the community in the future, given that household consumption will improve as the quality of intergenerational health improves.

However, his party found that household consumption was projected to rise higher in the middle and upper economic classes, compared to the lower class.

"What does this show? That the welfare effect is not only concentrated on poor households. In this poor household, consumption still increases even though it is small, but this benefit is more internalized in the form of improving child nutrition, not direct consumption expansion," said Rizal.