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Jakarta Post

Jokowi changes 2020 state budget again, with deficit at 6.34% of GDP

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Fri, June 26, 2020   /   03:12 pm
Jokowi changes 2020 state budget again, with deficit at 6.34% of GDP Rupiah banknotes are counted at a money changer in Jakarta on Jan. 12, 2015. President Joko “Jokowi” Widodo signed Wednesday a presidential regulation on an increase in state spending and a widening state budget deficit amid Indonesia’s fight against the coronavirus pandemic. (JP/Jerry Adiguna)

President Joko “Jokowi” Widodo signed Wednesday Perpres No. 72/2020, a presidential regulation that regulates an increase in state spending and a widening state budget deficit amid Indonesia’s fight against the coronavirus pandemic.

The government now officially states that the 2020 state budget deficit is expected to reach Rp 1.03 quadrillion (US$73.4 billion) or 6.34 percent of gross domestic product (GDP) after several high-ranking officials mentioned the figure in recent days. A previous presidential regulation, Perpres No. 54/2020, which also amended the budget, stipulated a deficit of 5.07 percent.

Read also: Indonesia’s debt to swell further in 2021 to finance economic recovery

The latest regulation stipulates that state spending, which includes government spending and regional direct transfers and village funds, may reach Rp 2.73 quadrillion this year, an increase of Rp 125.3 trillion from the figure stated in the previous regulation announced in April.

State income is expected to reach Rp 1.69 quadrillion, a decrease of Rp 60.9 trillion from the government’s earlier projection due to lower tax collection as the pandemic hit all economic sectors.

The speed of the revisions underscores the ferocity with which the virus is moving through the economy.

“All economic sectors are now under intense pressure,” Finance Minister Sri Mulyani Indrawati said recently. “The situation is developing rapidly, so the stimulus program will change again as we look at economic developments and try to mitigate the downside risks.”

Read also: GDP to contract by 3.1% in Q2 on COVID-19 headwinds

The government has allocated Rp 695.2 trillion worth of stimulus spending in a bid to prevent a more severe economic downturn and strengthen healthcare systems amid the pandemic. This is the latest increase from around Rp 677 trillion allocated in early June.

The coronavirus pandemic has ravaged the country’s economy, with government officials expecting an economic contraction of 0.4 percent this year in the worst-case scenario, or growth of 1 percent in the baseline scenario. Indonesia’s economy grew 2.97 percent in the first quarter, the weakest since 2001.