Indonesia: Fiscal deficit jumps to IDR764.9tr

  • Indonesia’s budget deficit has increased to IDR764.9tr as of Oct 20, with the government borrowing a record amount to bring the economy out of recession and combat a raging coronavirus outbreak.
  • The epidemic has eroded state revenue and spurred government spending, causing the budget deficit to equal 4.67% of GDP. The figure, however, remains within the government’s forecast of a record high 6.34% deficit.
  • “Our fiscal policy will be directed to turn the economic rebound into a sustained and strong economic recovery,” Finance Minister Sri Mulyani Indrawati said, adding that the government would continue to use the budget to ensure recovery while handling the pandemic.
  • As of Oct 20, the government collected only IDR1.27qd in state revenue, a 15.4% y/y decline due to falling tax revenue.
  • Tax revenue, the main source of income for the government, fell 18.8% y/y to IDR826.9tr because of a sharp fall in import taxes and the implementation of a corporate income tax cut expected to improve economic activity.
  • At the same time, state spending rose 13.6% y/y to IDR2.04qd or 74.5% of the year’s target. Central government spending rose nearly 20% y/y to IDR1.34qd during the period driven by higher social and stimulus spending.
  • As of 18 Nov 20, the government has spent 58.7% of the stimulus funds (IDR695.2tr).
  • Sri Mulyani expects Indonesia’s debt ratio to reach 37% of GDP in 2020, though that will still be below the average among EMs.

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