Indonesia 2021 budget deficit smaller than target as revenues rise

INDONESIA recorded a budget deficit of 4.65 per cent of gross domestic product (GDP) for last year, sharply lower than initial estimates, as revenues surpassed their target, the finance minister said on Monday (Jan 3).

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

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

But it collected 2,003.1 trillion rupiah (S$189.6 billion), above target for the first time in 13 years and representing a 21.6 per cent 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 per cent 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 per cent. By law, Indonesia’s budget deficit must be under 3 per cent of GDP in 2023.

Handy Yunianto, Mandiri Sekuritas’ fixed income analyst, said this year’s fiscal deficit has the potential to narrow further to 4.1 per cent 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 programme that will run in the first half of 2022.

Josua Pardede, Bank Permata’s economist, said that the 2022 fiscal deficit could come in at a range of 3.75 to 4.25 per cent 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.

“We hope the good result of 2021 will provide us some cushion for 2022,” the minister said, noting the government had a 84.9 trillion rupiah cash reserve from last year that it can carry over and use this year. REUTERS