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Indonesia parliament body, government agree to widen 2021 fiscal deficit to 5.7% of GDP

Indonesia parliament body, government agree to widen 2021 fiscal deficit to 5.7% of GDP

File photo of the business district in Jakarta, Indonesia, May 2, 2019. (Photo: REUTERS/Willy Kurniawan)

JAKARTA: A key Indonesian parliamentary committee on Friday (Sep 11) reached an agreement with the government to expand the 2021 budget deficit target to 5.7 per cent of gross domestic product, from 5.5 per cent initially proposed by President Joko Widodo, the committee chairman said.

The 2021 economic growth target was approved at 5 per cent, the midpoint of the president's proposed range of 4.5 per cent to 5.5 per cent, while the rest of the budget assumptions were approved by the budget committee without changes, said committee chairman Said Abdullah.

READ: Jokowi unveils US$185 billion budget for 2021; Indonesia's GDP targeted to grow between 4.5% and 5.5%

The official outlook for GDP this year is within a range of 1.1 per cent contraction to 0.2 per cent growth, versus 2019's 5 per cent expansion.

The wider deficit was due to an agreement between the committee and government officials to raise spending slightly and reduce the tax revenue target for next year.

The total spending for 2021 was temporarily set at 2,750 trillion rupiah (US$184.69 billion), up from the 2,747.5 trillion the president proposed in August.

The new target for total state revenue was 1,743.6 trillion rupiah, down from the August proposal of 1,776.4 trillion rupiah.

The committee chairman said the new tax target was more realistic, given an uncertain economic recovery path with the COVID-19 outbreak still raging.

"If the (tax) target isn't reached, the government has to have a good risk management so as not to add onto the budget deficit," he said.

READ: Jakarta to return to large-scale social restrictions as COVID-19 cases continue to rise: City governor

READ: Six months after COVID-19 strikes Indonesia, questions linger over healthcare capacity and equipment

Finance Minister Sri Mulyani Indrawati said the additional spending approved was due to bigger allocations for energy subsidies and other spending that took into account economic uncertainties.

Lawmakers did not discuss how plans to reinstate large-scale social restrictions in the capital Jakarta starting Monday would affect the outlook for Southeast Asia's largest economy.

Sri Mulyani on Thursday said such restrictions will have "serious impact on the social economic conditions of society", according to a local media report.

The committee's approval will be voted on by parliament later, but its endorsement is usually passed.

Source: Reuters/dv

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