Indonesia eyes smaller budget deficit in 2023 amid surging commodity prices

  • The government has announced that the 2023 budget plan will return the deficit to below 3% in 2023, with analysts expecting the path of fiscal consolidation to be rather smooth due to surging commodity prices and a much-recovered economy.
  • The Finance Ministry unveiled that the 2023 deficit would be between 2.81% and 2.95%, much lower than the 2022 budget target of 4.85%.
  • With this plan, the government expects to cut the deficit to between IDR562.6tr and IDR596.7tr. The government has projected it will reach the deficit target by increasing state revenue by more than 20% to IDR2.3qd, while limiting the increase in spending to less than 10%, at IDR2.9qd, compared with the 2022 budget.
  • Infrastructure and education spending would see an up to 10% increase from the 2022 figure, while health care – not including the COVID-19 budget – could hike up to 40%.
  • However, the budget for social aid was set to drop between 19% and 23%. “I think the 2023 budget plan is achievable, as long as commodity prices remain high,” Trimegah Securities chief economist Fakhrul Fulvian told The Jakarta Post, adding Indonesia had relied on commodities to support economic recovery during the pandemic.
  • Finance Minister Sri Mulyani Indrawati warned that the global inflation crisis could affect Indonesia and heighten pressure on the country’s debt and interest payments. Therefore, she said, reaching a lower deficit was a must, as it was essential to lower the debt issuance as well.

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