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State budget deficit to widen as government counters virus effects: Sri Mulyani
The COVID-19 outbreak has prompted the government to provide a stimulus package to ensure economic growth remains at the key 5 percent mark.
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Finance Minister Sri Mulyani Indrawati speaks during a panel discussion on financial inclusion at the 2016 Annual Meetings of the International Monetary Fund Headquarters and the World Bank Group on Oct. 7, 2016, in Washington, DC. (AFP/Zach Gibson)
T
he government expects the state budget deficit to be larger than its projection this year as it struggles to tackle the impacts of the global COVID-19 outbreak.
Finance Minister Sri Mulyani Indrawati said on Wednesday that the government expected the deficit to exceed its initial target of 1.76 percent of the country’s gross domestic product (GDP) as stipulated in the 2020 state budget.
“We’re still assessing the deficit, but there is still room for it to increase beyond the figure stipulated in this year’s state budget,” she told the press in Jakarta.
Given the challenges the government has faced since the beginning of this year, Sri Mulyani also said the budget deficit target was conservative, as the outbreak had prompted the government to use its fiscal instruments to provide a stimulus to ensure economic growth remained at the key 5 percent mark.
Read also: Indonesia announces $742m stimulus to shield economy from virus
The pneumonia-like illness has spread to dozens of countries around the world and has prompted China to significantly reduce its economic activity to contain the outbreak. Economists have projected that the world’s second largest economy will see its growth slow by up to 1 percentage point.
Sri Mulyani said previously that a drop of 1 percentage point in China’s growth would result in a drop of 0.3 to 0.6 percentage points in Indonesia’s economic expansion.
