Indonesia: Budget deficit projected to reach 5.7% of GDP in 2021 as uncertainty hits tax revenue

  • The government and the House of Representatives have agreed to widen the state budget deficit to 5.7% of gross domestic product (GDP) in 2021 as uncertainty surrounding the coronavirus pandemic is expected to further affect activity and eventually tax revenue.
  • The coronavirus outbreak in the country has escalated economic uncertainty in 2020 and 2021, Finance Minister Sri Mulyani Indrawati said on 11 Sep 20, adding that the government would revise macroeconomic assumptions underpinning the state budget to reflect the new reality.
  • The government now expects the fiscal deficit to reach IDR1000tr (USD67.32 bn), 5.7% of GDP, and increase by IDR35.2tr compared to the previous estimate of 5.5% of GDP, as tax income will fall further.
  • However, the government would maintain its economic growth target at around 5%, the finance minister said, adding that no one could truly know the trajectory of the pandemic in the next 12 months from Sep 20. The outlook for GDP in 2020 is within the range of a 1.1% contraction to a 0.2% expansion.

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