Indonesia's Prabowo plans to increase growth, 'be daring' with debt

Indonesia's President-elect Prabowo Subianto visits Japan

JAKARTA (Reuters) -Indonesia should be more daring on taking on additional debt, its President-elect Prabowo Subianto said on Wednesday, while claiming that his target of boosting growth in Southeast Asia's largest economy to 8% annually would be easy.

Prabowo, 72, won February's general election by a huge margin and is set to take over from President Joko Widodo in October, but his fiscal plans have faced investor scrutiny due to costly campaign promises.

Asked about whether there is fiscal space for his programmes within the country's legal limit for an annual budget deficit of 3% of GDP, Prabowo told the Qatar Economic forum that the figure was "arbitrary", but he has no plans to change the rules.

"I think we have the lowest debt to GDP figure in the world, one of the lowest. So now I think it's time to be more daring within good governance," he said.

Indonesia's debt to GDP ratio currently is just under 40%. Last year's fiscal deficit was 1.65% of GDP, the slimmest since 2011.

Prabowo's campaign promise of providing free lunches for school students is expected to cost almost $30 billion, or 14% of the 2024 state budget, when it is fully implemented.

The president-elect has also vowed to continue Widodo's landmark project of moving the country's capital to Nusantara, a $32 billion new city being built in the forests of Borneo island.

The project will be developed over a period of 25 to 30 years, with domestic resources the main driver, Prabowo said.

On accelerating growth, Prabowo said he plans to focus on boosting food and energy production, including by boosting palm-based biofuel output.

"I am very confident we can easily achieve 8% and I am determined to go beyond," he said, adding he saw the growth target being achieved in 2-3 years.

Indonesia's growth has stayed around 5% in the past decade, excluding during the COVID-19 period.

Separately, analysts with Fitch Ratings and S&P Global Ratings forecast growth will remain around 5% in the medium term.

Analysts from both agencies, which held separate seminars in Jakarta on Wednesday, also predicted Indonesia's budget gap will swell after Prabowo takes office, though it will likely remain under the deficit ceiling.

"We feel that risks have increased especially over the medium-term, not so much for 2024 but for 2025 and certainly further on," Thomas Rookmaaker, head of Asia-Pacific sovereigns at Fitch Ratings, said in an interview.

(Reporting by Stanley Widianto and Stefanno Sulaiman; Editing by John Mair, Gayatri Suroyo, Raju Gopalakrishnan)