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Indonesia’s 2020 fiscal gap slightly better than expected at 6.09% of GDP

[JAKARTA] Indonesia’s fiscal deficit in 2020 is seen at 6.09 per cent of gross domestic product (GDP) based on unaudited state budget realisation, the country’s finance minister said on Wednesday, as the coronavirus pandemic hit revenues.

The 2020 deficit expanded from 2.2 per cent of GDP in 2019 but was better than the government’s estimate of 6.34 per cent of GDP.

Finance Minister Sri Mulyani Indrawati said the impact of the coronavirus outbreak will continue to be felt during 2021, but a mass vaccination programme due to start soon would boost consumer confidence.

The government would continue efforts to lower the gap to below 3 per cent of GDP by 2023, she said.

Overall state revenue in 2020 was 17 per cent lower than a year earlier and 66.3 trillion rupiah (S$6.27 billion) below target, mostly on weak tax revenue as companies’ income suffered from measures imposed to control the epidemic.

Meanwhile, government spending rose 12 per cent from a year earlier, as it put more money into healthcare and social assistance.

The government had spent 579.78 trillion rupiah or 83.4 per cent its Covid-19 relief fund as of the end of 2020, Dr Sri Mulyani said, and the remaining budget would be spent this year.

“The impact of Covid-19 will continue to be felt in 2021, thought the vaccination is expected to increase people’s confidence,” she said, adding that state budget will continue to be directed towards economic recovery.

Indonesia has recorded 788,402 Covid-19 cases and 23,296 deaths as of Wednesday, among Asia’s highest numbers. It will impose new restriction in Java and Bali islands for two weeks.

Dr Sri Mulyani said it was unclear what impact the new curbs would have on first-quarter growth.

Southeast Asia’s biggest economy is expected to have seen a 2.2 per cent to 1.7 per cent contraction in 2020. The government is targeting 5 per cent GDP growth this year.

REUTERS