Indonesia cuts 2022 fiscal deficit outlook on strong revenue

INDONESIA will likely book a 2022 fiscal deficit of 732.2 trillion rupiah (S$68.2 billion), or 3.92 per cent of gross domestic product (GDP), smaller than a previous outlook of 4.5 per cent of GDP, due to strong revenue forecasts, its finance minister said on Friday (Jul 1).

Sri Mulyani Indrawati told a hearing with parliament’s budget committee this meant the government would cut debt issuance to 757.6 trillion rupiah, from 943.7 trillion rupiah in her previous target.

South-east Asia’s largest economy has been enjoying an export boom on the back of high commodity prices. The better export earnings and an economic recovery from the impact of the Covid-19 pandemic have fuelled a surge in government income.

The windfall revenue would be used to cut the debt issuance target to better manage Indonesia’s fiscal position amid rising global funding costs, Dr Sri Mulyani said.

“Our debt issuance has experienced an extraordinarily steep decline. This is an indicator of the health of our state budget, which is extraordinarily good,” she said.

The minister’s latest forecast was for full-year revenue of 2,436.9 trillion rupiah, above her previous prediction in May and representing a 21 per cent yearly increase.

She also expected some additional spending compared with May figures, including slightly higher subsidies, bringing the total budget to 3,169.1 trillion rupiah, about 14 per cent bigger than last year.

However, Dr Sri Mulyani also warned of risks of commodity prices cooling later in the year and in 2023, while also flagging risks of domestic consumption and investment being affected by rising inflation and higher global interest rates.

She gave a GDP growth forecast for this year of 4.9 per cent to 5.4 per cent in her presentation, versus 4.8 per cent to 5.5 per cent previously. REUTERS