Budget Efficiency Becomes President Prabowo's Biggest Challenge

JAKARTA The strong economic foundation, maintained macroeconomic stability and increased people's welfare is said to be a positive achievement for one year of President Prabowo Subianto's administration and Vice President Gibran Rakabuming Raka in the economic sector.

According to Finance Minister Purbaya Yudhi Sadives, in the second quarter of 2025, Indonesia's economic growth was stable at 5.12 percent, one of the highest among the G20 countries. This raises optimism that national economic performance will continue to improve until the end of the year.

"So this is all part of the growth rate in the second quarter. I'm sure the third quarter will drop slightly, but that's okay. The fourth quarter will grow faster," he explained as reported by the Ministry of Finance website.

Prabowo Subianto and Gibran Rakabuming Raka. (Bambang Eros VOI)

"It's okay"

Inflation is also maintained low in 2.65 years on year (yoy) with a state budget deficit of only 1.56 percent of GDP. Each of them is among the lowest among the G20 countries. The Minister of Finance explained that this achievement could not be separated from the state treasury management strategy through the placement of Rp200 T in Himbara Bank which aims to be productive in supporting economic activity.

In terms of trade, Indonesia recorded a trade balance surplus for 64 consecutive months, with growth of 45.8 percent from January to September 2025. People's welfare indicators also showed improvement. The unemployment rate fell to 4.76 percent in February 2025, the lowest since the 1998 crisis. Meanwhile, the poverty rate fell to 8.47 percent in March 2025, which is the lowest achievement in history.

The capital market also responded positively. The Composite Stock Price Index (JCI) recorded an all-time high at the level of 8,257.86 on October 10, 2025. According to the Minister of Finance, this reflects the confidence of market players in the direction of government economic policy.

Even though there is now a correction that has increased for a while, what needs to be considered is the economic improvement that we will create in the future, not just for a moment. We will seriously improve the economic foundation, really. I will mobilize all my existing knowledge who have studied for how many years," said Purbaya.

Great Institute economist, Perdana Wahyu admitted that a number of key indicators did show significant improvements, ranging from trade balance to reducing unemployment and poverty. In particular, he highlighted the government's success in reducing the unemployment rate significantly.

As of February 2025, the unemployment rate fell to 4.76 percent. Maybe now it will go down again because the Free Nutrition Eating program is already running, the internship program has also been implemented, and the Village Cooperative is starting to activate. There are so many programs that help reduce the unemployment rate," he said.

Another achievement that should be appreciated is the reduction in poverty to 8.47 percent as of March 2025, which is the lowest poverty rate since the 1998 crisis. This indicates that Indonesia's fight against poverty reached its peak. In addition, economic growth which reached 5.12 percent was also referred to as an achievement that exceeded the expectations of many parties.

Meanwhile, economist Drajad Hari Wibowo appreciated the direction of Prabowo's government's economic policy. He considered the food self-sufficiency program to be an important milestone in strengthening national food security. Deregulations carried out by the government make it easier for farmers to obtain subsidized fertilizers. The rules that used to be complicated are now simplified, so that distribution becomes faster and on target," he said.

He added that the people's economy continues to grow thanks to the synergy of priority programs such as Free Nutrition Food (MBG), national internship programs, and Red and White Village Cooperatives. Free Nutrition Food Program is even proven to encourage economic activity in the food and MSME sectors. When the budget is added, demand for foodstuffs such as eggs increases rapidly, and the government responds quickly by forming a village business group that raises laying hens," he continued.

Agriculture (Photo: Ministry of Agriculture)

"It's okay"

"It's okay"

"It's okay"

"It's okay"

In addition, the government is also considered successful in maintaining a balance between macroeconomic stability and strengthening the people's economy. These achievements, continued Drajad, show that in the first year, the Prabowo 'Gibran government was not only able to maintain economic stability, but also realize growth that sided with the small people which became a strong foundation towards national economic independence.

Untargeted Economic Stimulus

However, of course there are still many shortcomings that must be corrected by President Prabowo and his assistants in the economic sector. Director of Economics and Law Studies (Celios), Nailul Huda said, there are several basic issues that must be evaluated immediately, especially regarding the slowdown in economic growth, decreasing people's purchasing power, and the effectiveness of fiscal policy.

According to him, Indonesia's economic growth shows signs of weakening throughout 2025. In the first quarter of 2025, the economy only grew 4.87 percent, relatively low considering that this period coincided with the momentum of Ramadan and Eid.

"Triwulan II 2025 although it is claimed to grow 5.12 percent, there are still irregularities that I feel make these claims invalid. Other indicators show that economic conditions are not good," he said.

In addition, the performance of the manufacturing industry is also said to be experiencing a slowdown in which the manufacturing industry's purchasing manager index (PMI) reached its lowest post-Covid-19 point in April 2025, at 46.7 points.

This condition was exacerbated by the increase in the number of layoffs (PHK) by more than 30 percent as of June 2025 and the annual decline in automotive production. Although the government claims the manufacturing industry has grown significantly in the second quarter of 2025, the condition of layoffs cannot lie, "added Huda.

In terms of public consumption, he said that purchasing power was still depressed as seen from the decline in the Consumer Confidence Index (IKK) which reached the 115th level in September 2025, the lowest since April 2022. This figure shows the weakening of people's purchasing power which has an impact on stagnation in household consumption growth at 4.97-4.98 percent only.

In addition, tax revenues have also weakened compared to previous years. Huda assessed that the decline was caused by a decrease in public trust in the government and the problem of implementing the quintex system. "When receipts occur shortfall, expenses increase sharply because of the MBG program and others, the APBN deficit swells," he added.

Furthermore, Huda assessed that various economic stimuli launched by the government had not been effective in encouraging the economy. "The stimulus assistance issued tends to be undirected, such as discounted transportation toll roads, even the MBG program has no significant impact. The economy is not encouraged because of the stimulus program. The trillions of money allocated are useless," he said.

Not to forget, he also criticized the government's budget efficiency policy which was considered to be reducing economic activity in a number of sectors. According to him, there is a hotel sector that is deeply shaken by the budget efficiency program, which has resulted in tens of thousands of people being laid off or the status of their workers being used as daily workers.

At the regional level, budget cuts are said to have made many local governments raise local taxes to cover shortages. However, this policy actually exacerbates purchasing power and weakens the regional economy. The area that has been cut is busy raising regional tax rates which in turn make purchasing power decrease, the regional economy is getting worse," said Huda.

Budget Governance Discipline

Paramadina University economist, Wijayanto Samirin also revealed that there are still many things that the government must improve in the economic sector. First, the preparation of the 2026 State Budget which does not describe the optimal budget allocation and fiscal discipline. This is evident from the high dependence on debt.

Second, the emergence of priority programs without adequate technology. For example, MBG, the Red and White Kopdes and 3 million houses. "In addition to causing problems in the field, they also have the potential to become fiscal time bombs," he said.

Third, advanced deindustrialization is followed by the weakening role of the formal sector. Fourth, the investment climate that tends to worsen. Fifth, the cabinet and the bureaucracy that are getting fatter which have the potential to cause budget waste and coordination problems.

"The Prabowo government still has a long time to go. It needs to improve planning, want to hear input, and carry out programs in a structured and careful manner. Don't grupulate," continued Wijayanto.

A public policy maker, Sapraji said, efficiency and budget management are still great homework for the Prabowo Subianto government. According to him, a cabinet consisting of many members absorbs a large routine budget, which should be more optimally allocated for strategic development spending. This has the potential to hamper the speed and effectiveness of the realization of strategic programs that have a direct impact on national development.

In addition, in terms of the policy formulation process, there is still a slight trend of a comprehensive research and evaluation-based approach. The government prioritizes the formation of new institutions more without strengthening the existing organizational capacity, so that some policies are still elitist and populist without actually solving structural problems at the root of society.

Economic stability is also a concern. The weakening of the rupiah exchange rate to an alarming level indicates the lack of optimal market confidence in the direction of government policy. The government is required to be more transparent, proactive, and consistent in maintaining macroeconomic fundamentals so that investor and public trust can recover and be sustainable," explained Sapraji.