Indonesia: Government expects budget deficit to widen to 6.3% in 2020

  • Indonesia’s budget deficit is expected to widen to 6.27% of gross domestic product in 2020, more than double the initial ceiling, as President Joko Widodo ramps up stimulus to counter the blow from the coronavirus pandemic.
  • “We have seen the impact on the economy as it is hit very hard, and the pressure will likely continue in 2Q20,” Finance Minister Sri Mulyani Indrawati told reporters. “We hope this pressure can ease in 2H20. We still hope for the best, for the economy to recover.”
  • The government will have to again revise the assumptions underpinning its budget, Indrawati said, adding that the budget shortfall now is expected at IDR1,028.5tr. The government has set aside a total of IDR641.7tr as part of its emergency virus response, the finance minister said.
  • The deficit change comes less than two months after the government announced it was abandoning a deficit cap of 3% it had observed since 2003, and estimated the shortfall at 5.07% of GDP.
  • The speed with which assumptions have been revised underscores the ferocity with which the virus is moving through the economy.
  • The government on 18 May 20 unveiled details of its virus exit strategy, which would reopen the economy in stages and also divide parts of the country up according to risk from the virus. Despite that, policy makers in Southeast Asia’s biggest economy increasingly worry the downturn could be deeper than initially expected.

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