Indonesia budget deficit sharply smaller than target

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JAKARTA- Indonesia recorded a budget deficit of 4.65 percent of gross domestic product for last year, sharply lower than initial estimates, as revenues surpassed their target, the finance minister said on Monday.

Revenues rose on the back of a commodity boom and growing domestic demand, Sri MulyaniIndrawati told a news conference.

The government had originally designed the 2021 budget with a 5.7 percent deficit estimate.

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But it collected 2,003.1 trillion rupiah ($140.43 billion), above target for the first time in 13 years and representing a 21.6 percent growth on a yearly basis, Sri Mulyani said.

“This is a very strong recovery and rebound,” she said. “This year we still have the pandemic and we were hit by Delta and Omicron, but we managed to book a 21.6 percent growth.”

Total government spending for 2021 was 2,786.8 trillion rupiah, she said, citing the latest unaudited data.

For 2022, the government has a budget deficit outlook of 4.85 percent. By law, Indonesia’s budget deficit must be under 3 percent of GDP in 2023.

Handy Yunianto, MandiriSekuritas’s fixed income analyst, said this year’s fiscal deficit has the potential to narrow further to 4.1 percent as some tax hikes approved by parliament in late 2021 are to be factored into the revenue target.

Those measures include an increase in value added tax rate, a new carbon tax in April and a tax amnesty program that will run in the first half of 2022.

JosuaPardede, Bank Permata’s economist, said that the 2022 fiscal deficit could come in at a range of 3.75 percent-4.25 percent of GDP.

However, Sri Mulyani said it would be hard to forecast 2022, arguing that she could not have predicted last year’s events such as the spread of the Delta variant and the commodity boom.

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