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Indonesia eyes smaller budget deficit in 2023 amid surging commodity prices
The government has announced that the 2023 budget plan would return the deficit to below 3 percent next year, with analysts expecting the path to fiscal consolidation to be smooth due to surging commodity prices and a much-recovered economy.
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An employee works on a truck filled with coal at the Karya Citra Nusantara (KCN) Marunda port in Jakarta on January 17, 2022, after Indonesia eased an export ban on the commodity. (AFP/Adek Berry)
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he government has announced that the 2023 budget plan will return the deficit to below 3 percent next year, with analysts expecting the path of fiscal consolidation to be rather smooth due to surging commodity prices and a much-recovered economy.
The Finance Ministry on Thursday unveiled that the 2023 deficit would be between 2.81 and 2.95 percent, much lower than the 2022 budget target of 4.85 percent. With this plan, the government expects to cut the deficit by more than 30 percent from last year to between Rp 562.6 trillion (US$39.2 billion) and Rp 596.7 trillion.
The government has projected it will reach the deficit target by increasing state revenue by more than 20 percent to Rp 2.3 quadrillion, while limiting the increase in spending to less than 10 percent, at Rp 2.9 quadrillion, compared with the 2022 budget.
Infrastructure and education spending would see an up to 10 percent increase from the 2022 figure, while health care – not including the COVID-19 budget – could hike up to 40 percent. However, the budget for social aid was set to drop between 19 and 23 percent.
“I think the 2023 budget plan is achievable, as long as commodity prices remain high,” Trimegah Securities chief economist Fakhrul Fulvian told The Jakarta Post on Monday, adding Indonesia had relied on commodities to support economic recovery during the pandemic.
Read also: Lower budget deficit to help Indonesia face global risks in 2022
The government seeks to return the budget deficit to below 3 percent this year to follow the mandate of Law No. 2/2020 on state fiscal policy and system stability for COVID-19 handling, which only permits the government to exceed the budget deficit cap for a maximum of three years. After having excessive deficits in 2020, 2021 and 2022, the deficit cap must return to below 3 percent of GDP in 2023.
