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State budget deficit may pass 3 percent ceiling if situation gets worse, analyst warns
The University of Indonesia’s senior economist, Faisal Basri, said the current virus crisis would have a deeper effect on the country’s economy than the financial crisis of 2008 and would further drag down the country’s economic growth.
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Medical workers are preparing isolation chambers for ship crew members suspected of being infected with the COVID-19 coronavirus at Panjang Port in Bandar Lampung on Jan. 29.
(Antara/Ardiansyah)
I
ndonesia's state budget deficit may surpass the 3 percent ceiling this year as the impact of the COVID-19 outbreak and a sharp drop in oil prices could further worsen Indonesia’s economic outlook, a senior economist is warning.
The University of Indonesia’s senior economist, Faisal Basri, said the current virus crisis would have a deeper effect on the country’s economy than the financial crisis of 2008 and would further drag down the country’s economic growth.
“During the 2008 global financial crisis, the government took several economic decisions. This time, economic policy is blunt to address the virus crisis,” Faisal told The Jakarta Post on Friday. He urged the government to issue a presidential regulation (Perpres) to allow a deficit of more than 3 percent. He feared the deficit would further widen from the government’s projection of 1.8 percent of gross domestic product (GDP) to pass the ceiling if the situation gets worse.
Indonesia’s economy grew 5.02 percent in 2019, the weakest since 2015, Statistics Indonesia (BPS) showed.
In its October 2019 World Economic Outlook, the International Monetary Fund estimated Indonesia’s GDP would grow 5.1 percent in 2020, but many analysts fear the decline in China’s economic growth caused by the coronavirus outbreak would further worsen Indonesia’s economic growth outlook.
Finance Minister Sri Mulyani Indrawati said Indonesia’s budget deficit may widen to from 2.2 to 2.5 percent of GDP in 2020, adding that the new forecast had taken into account the impact of the outbreak and a slump in oil prices driven by Saudi Arabia’s decision to launch a price war against Russia.
“We are still focused on formulating the correct stimulus policy amid the fast-changing [global] development,” Sri Mulyani told reporters in Jakarta on Monday. “We will assess the tax revenue, oil production and rupiah exchange rate amid the dynamics of oil prices and a weakened global economy.”
