Indonesia steps up fiscal spending to keep economy from contracting

  • Indonesia’s 2020 budget deficit is expected to widen further as the government steps up fiscal spending to keep the virus-hit economy from shrinking, its finance minister said on 3 Jun 20.
  • Sri Mulyani Indrawati expected the 2020 budget deficit to swell to 6.34% of GDP, compared with an earlier estimate of 6.27%, which was already the widest in more than a decade.
  • Total spending for the so-called National Economic Recovery Programme in 2020 is expected to rise to IDR677.2tr, Indrawati said, up from the IDR641.17tr she had announced.
  • The changes will boost the size of the 2020 budget to IDR2,738.4tr, she said in an online news conference.
  • “With the stimulus that we have announced, we hope to be able to keep economic growth to above 0%, meaning 1% or close to 2.3%,” the minister said.
  • She said the government was maintaining its 2020 GDP forecast of between -0.4% to 2.3%. The economy grew 5.02% in 2019.
  • The increase in spending represented an extension of some welfare programmes and bigger budget allocations for existing measures, such as subsidies for interest payments for small firms, she said. She did not announce any new measures.

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