Ministry Of Finance: Indonesia's Public Savings Ratio To GDP Is Still Low, Losing To Malaysia

Illustration. (Photo: Doc. Antara)

JAKARTA - Head of the Financial Sector Policy Center of the Fiscal Policy Agency of the Ministry of Finance (Kemenkeu) Adi Budiarso revealed that the savings ratio of the Indonesian people, both in banking, insurance, capital markets, and pension funds is still very low.

"The savingsbot in Indonesia is only 20 percent of gross domestic product (GDP)," Adi said at the 2023 SPARK Indonesia Banking and Finance Summit, quoted from Antara, Tuesday, February 28.

He also compared the savings ratio in Malaysia which reached 80 percent of GDP and Australia which even reached 175 percent of GDP.

Therefore, the Indonesian government is currently continuing to transform, reform and innovation, with the help of digitization to increase literacy and access to finance. One of the reforms carried out is through the Law on Strengthening and Development of the Financial Sector (UU P2SK).

Reform in the P2SK Law is expected to increase the portion of Indonesian people's savings individually to an average of 10 percent of the net wage every month.

Adi said that currently the average portion of people's savings is only three percent of the net wage, whereas to achieve financial health the portion of savings should be 10-15 percent of the net salary.

In terms of the savings portion of people's pension funds in Indonesia is also still very small, namely 6 percent of GDP, so the P2SK Law will encourage the portion of the pension fund.

"If there is no reform in the P2SK Law, in 2045 the estimated portion of Indonesian people's pension funds is only 11 percent of GDP," he said.

Thus, he also hopes that in the future the financial sector will have to rise, with savings in the form of insurance and pension funds that dominate the domestic financial sector.

To encourage an increase in these two sectors, the management of insurance institutions and pension funds must be equivalent to banks which currently still dominate the financial sector in the country.