Jokowi, as the president is popularly known, proposed a budget of 3,041.7 trillion rupiah ($205.94 billion) for next year, with a deficit of 2.85% of gross domestic product, the smallest budget gap since 2019.
Next year will be the first year that Southeast Asia's largest economy reinstates a legally mandated fiscal deficit ceiling of 3% of GDP, after it was waived for three years to allow the government to respond to the COVID-19 pandemic.
The size of the proposed budget was about 2% smaller than spending plans for 2022. Jokowi predicted an almost 8% increase in total revenue next year to 2,443.6 trillion rupiah.
"The year 2023 provides a momentum to carry out quality fiscal consolidation so that fiscal management maintains a balance between countercyclical capabilities and efforts to control financing risks," Jokowi told lawmakers in a speech broadcast nationally.
He was speaking a day ahead of Indonesia marking 77 years of independence from the Dutch on Aug 17. In an earlier state-of-the-nation speech, he hailed the country's strong economic fundamentals amid global volatility.
The president said the economy faces multiple risks from the war in Ukraine, global monetary tightening and supply chain disruption, but added those "should not make us pessimistic".
The budget will be an engine of growth, the president said, setting an economic growth target of 5.3% next year and vowing to manage inflation at 3.3%.
Indonesia's inflation was at a seven-year high of 4.94% in July. Jokowi's economics minister has said this year's 5.2% growth target would likely be achieved after an acceleration in second-quarter growth.
Jokowi's budget assumptions also include the rupiah exchange rate averaging at 14,750 a dollar, near where it's currently trading, and the benchmark 10-year bond yield at around 7.85%, above current levels.
The president did not elaborate what policy decision he would take regarding energy subsidies in 2023, even as his government's spending on fuel and power subsidies has tripled this year. His ministers have said the government is currently reviewing a potential fuel price hike as global energy prices rise.
($1 = 14,770.0000 rupiah)
(Additional reporting by Fransiska Nangoy, Bernadette Christina Munthe and Ananda Teresia; Editing by Kanupriya Kapoor)
By Stefanno Sulaiman and Gayatri Suroyo
