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Lower budget deficit to help Indonesia face global risks in 2022
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Finance Minister Sri Mulyani Indrawati explains the new Harmonized Tax Law (HPP) to the public and business associations in Nusa Dua, Bali on Nov. 19, 2021. (Finance Ministry/Tax office's public relation)
T
he government expects Indonesia’s state budget deficit for this year to be much smaller than expected, bolstering the country’s fiscal strength as policymakers anticipate new global economic risks next year that could undermine financial system stability.
Finance Ministry data on Thursday show this year’s deficit is expected to stand at around Rp 873.6 trillion (US$61.34 billion), or between 5.18 and 5.45 percent of the gross domestic product (GDP), far lower than the expected 5.7 percent of GDP outlined in the state budget (APBN).
The figures were unveiled a day after President Joko “Jokowi” Widodo broached several macroeconomic risks that the government was anticipating next year, including the United States Federal Reserve's tapering, slowing Chinese economic growth, falling commodity prices and a prolonged COVID-19 pandemic.
Bank Permata economist Josua Pardede told The Jakarta Post on Nov. 19 that the stronger fiscal standing allowed the country to better soak up the impact from upcoming global economic risks.
A wide fiscal space allowed the government to more readily disburse funds for stimuluses, social aid and infrastructure development, and that the government could create more fiscal space by delaying low-urgency projects, he said.
“With a lower deficit, we could expand the fiscal space anytime needs arise. When an external shock occurs, we can deal with the impact of external shocks and our countercyclical will be much more effective,” Josua said.
The lower budget deficit would also make it easier for the government to reinstate a 3 percent budget deficit cap by 2023 as required by prevailing regulations.
