Indonesia: Government, lawmakers set 2021 state budget deficit at up to 4.7% of GDP

  • The government and the House of Representatives have agreed in principle on 2021 state budget assumptions with a deficit of 4.7% of gross domestic product (GDP) to bolster the economy from the coronavirus-induced recession.
  • The budget deficit is expected to reach 3.21% to 4.17% of GDP in 2021, but the government can widen the fiscal deficit to 4.7% if needed to fully support the recovery, said House Budget Committee vice chairman Muhidin Mohamad Said.
  • President Joko “Jokowi” Widodo will announce the detailed 2021 state budget, including exact revenue and expenditure figures, during his annual speech on 16 Aug 20.
  • The government and the House agreed that the assumption underpinning the 2021 state budget would see state spending reach 13.11% to 15.17% of GDP, while tax revenue is expected to reach 8.25% to 8.63% and nontax income 1.6% to 2.3% of GDP.
  • Indonesia’s economy could enter a recession in 3Q20 as the government expects GDP to shrink by 3.8% to 5.1% in 2Q20 and to decline by a further 1% in 3Q20.
  • The government expects the fiscal deficit to reach 6.34% in 2020 as it allocates IDR695.2tr (USD48.23bn) in stimuli to strengthen the country’s healthcare response and bolster the economy amid the pandemic.

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