The Impact Of Fiscal Policy On Economic Growth

Abstract

Fiscal policy plays a vital role in promoting regional economic growth through the efficient management of public revenues and expenditures. However, the increase in fiscal capacity has not always been accompanied by a significant rise in economic growth. Objective: This study aims to analyze the influence of fiscal policy, represented by the Regional Revenue and Expenditure Budget (APBD), Local Own-Source Revenue (PAD), and Transfer Funds, on the economic growth of Baubau City. Method: The research employs a quantitative descriptive approach with multiple linear regression analysis, using secondary data obtained from the Central Bureau of Statistics (BPS) and Regional Budget Realization Reports for the period 2017–2024. Results: The findings reveal that both partially and simultaneously, APBD, PAD, and Transfer Funds have no significant effect on the economic growth of Baubau City. The calculated F-value of 0.357 with a significance level of 0.788 (>0.05) and an R² value of 0.211 indicate that the three fiscal variables explain only 21.1% of the variation in economic growth, while 78.9% is influenced by other factors, such as investment, inflation, and labor. These results suggest that Baubau City’s fiscal policy has not yet been effective as an instrument for economic growth, as the budget allocation remains focused on routine expenditures and dependency on central government transfers. Conclusion: Regional fiscal policy has not been effectively implemented as a tool for economic development, thus improvement in budget allocation efficiency, optimization of PAD, and enhancement of productive public spending toward sustainable and growth-oriented sectors are urgently required.