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Extending social aid, subsidy pressure to swell deficit to 2.5 percent: World Bank
The projected deficit would be higher than initially planned by the government in this year’s state budget of 2.3 percent of GDP.
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A stage director looks on at the IMF/World Bank Annual Fall Meetings Plenary Session in Washington, DC, on Oct. 18, 2019. (AFP/Andrew Caballero-Reynolds)
I
ndonesia’s budget deficit is projected to rise to 2.5 percent of GDP this year, driven by an extension of social assistance programs, an increase in subsidy spending and a rise in government debt interest payments.
That is according to the World Bank’s Indonesia Economic Prospect report published on Monday, which highlights that the projected deficit would be higher than initially planned by the government in this year’s state budget of 2.3 percent of GDP.
“The fiscal stance expanded slightly amid rising social spending and subsiding commodity windfalls,” the institution wrote in the report.
Read also: Prabowo team vows fiscal prudence amid World Bank, IMF concerns
The World Bank’s projection, however, remained lower than the government’s estimate in February that expected this year’s deficit could swell to 2.8 percent of GDP, following an increase in spending on those areas.
A 2003 law stipulates that the fiscal deficit must not exceed 3 percent of GDP in any fiscal year and that the government’s total debt must stay within 60 percent of GDP.
The World Bank estimated that Indonesia’s revenue would decline by 4.2 percent year-on-year (yoy), following subsiding commodity windfalls and moderating economic activities.
