Indonesia’s Economic Minister Assures No Cuts to 2025 Economic Stimulus Budget

JAKARTA, investortrust.id – Coordinating Minister for Economic Affairs Airlangga Hartarto has confirmed that the budget for the 2025 economic stimulus package will remain intact, despite President Prabowo Subianto’s issuance of Presidential Instruction (Inpres) No. 1 of 2025 on Efficiency in State and Regional Budget Expenditures.

The efficiency measures are expected to save Rp 306.69 trillion ($19 billion), primarily by cutting costs on office supplies and ceremonial expenses.

“The efficiency measures will not affect programs but will focus on operational spending within ministries and agencies,” Airlangga stated at his office in Jakarta on Thursday, Jan 30, 2025. 

He emphasized that several industrial incentives included in the stimulus package would also be exempt from budget cuts. “All programs will proceed as planned,” he added.

Airlangga explained that the Ministry of Finance has already finalized the budget efficiency process at the ministry and agency levels, eliminating the need for further discussions with the Coordinating Ministry for Economic Affairs. “The directive has been issued. There’s no need for additional discussions,” he said.

The 2025 stimulus package includes measures such as monthly rice assistance of 10 kilograms and food aid for the bottom 20% of households. To ease household burdens, the government will also offer a 50% discount on electricity bills for two months. For middle-income groups, the government will provide VAT incentives for property purchases valued up to Rp 5 billion, with a tax base of Rp 2 billion. “The government will cover the VAT on Rp 2 billion, while the remaining Rp 3 billion will be paid by the buyer,” Airlangga explained in December 2024.

The government will also extend incentives for domestically produced battery-based electric vehicles (EVs) and continue its VAT luxury tax (PPnBM) exemption for certain fully imported EVs. “In line with existing programs, there will be exemptions for fully imported EVs,” he said.

Additionally, the government introduced a 3% VAT exemption for hybrid vehicles. Airlangga also highlighted income tax (PPh 21) incentives for individuals earning below Rp 10 million per month. “For those earning between Rp 4.8 million and Rp 10 million per month, the government will cover their income tax, particularly targeting labor-intensive industries,” he noted.

To support workers, the government will simplify the unemployment insurance claim process, extending the claim period to six months with benefits covering 60% of wages. “For certain labor-intensive industries, workplace accident insurance premiums will be discounted by 50% for six months,” he added.

For small and medium enterprises (SMEs), the government will extend the 0.5% final income tax rate until the end of 2025. “Under current regulations, the 0.5% tax rate for SMEs was set to expire in December 2024,” Airlangga said. He also announced new subsidies for investment credits aimed at revitalizing machinery in labor-intensive sectors such as textiles, footwear, and furniture. “Regardless of the bank, the government will subsidize 5% of the investment credit as part of the People’s Business Credit program,” he explained.

The Ministry of Finance has issued a regulation outlining 16 expenditure items subject to cuts, excluding employee salaries and social assistance.