Indonesia’s fiscal support should be tapered as economy recovers: Sri Mulyani

  • As Indonesia’s economy recovers from the pandemic, fiscal stimulus should no longer be a dominant factor driving growth, its finance minister said, signaling authorities will stick with their fiscal consolidation plans.
  • Sri Mulyani Indrawati was responding to a question at an investment forum about whether the government was considering extending the period during which it can design annual budgets with a deficit of more than 3% of gross domestic product.
  • “If the momentum of the recovery continues (to be) strong across the board … then the support from the fiscal (side) should not become the most dominant one,” Sri Mulyani said.
  • Authorities, she said, will be open minded in policymaking, but the government needed to restore the fiscal space for any future shock.
  • “We need to continue to support the recovery until it’s really stable and sustainable,” she said, highlighting the importance of fiscal discipline.
  • The 2022 budget deficit will likely narrow to near 4% of GDP, compared with an initial forecast of a 4.85% gap, Sri Mulyani said, expecting bigger revenue from tax reforms passed by parliament in late 2021.

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