Indonesia Finmin Predicts Smaller 2023 Budget Deficit

MACROECONOMICS - JAKARTA. Indonesia will likely book a smaller-than-expected budget deficit this year, even after taking into account President Joko Widodo's new incentives to boost growth, which will be rolled out later in 2023, its finance minister said on Wednesday.

Without providing a new figure, Sri Mulyani Indrawati told a press conference the budget deficit for the whole of 2023 will be below her latest estimate of 2.3% of gross domestic product.

In the January to September period, the budget had a surplus of 67.7 trillion rupiah ($4.27 billion), or 0.32% of GDP, on strong revenue collection and slow spending.

However, Sri Mulyani said spending is due to rise significantly in coming months to pay for upcoming bills, as well as for the government's new fiscal incentives.

"The budget deficit outlook is smaller because revenues have been higher than target and we will monitor global condition to carefully manage our debt," Sri Mulyani said.

Jokowi, as the president is popularly known, on Tuesday launched measures to support growth in Southeast Asia's largest economy, including a tax incentive for homebuyers, extending a rice handout programme and increasing cash handouts for millions of households to cope with rising food prices.

The policy package is worth a total of 13.39 trillion rupiah for the fiscal years of 2023 and 2024, Sri Mulyani said.

The measures will add 0.06 percentage point to 2023 GDP growth and 0.13 percentage point to 2024 GDP growth, she added.

The minister predicted 2023 growth to be 5.1%, slowing from 5.3% last year. The government has set a growth target of 5.2% for 2024.

Her policy to finance this year's budget deficit, which includes bond auctions, will be done in a measured way for the remainder of the year, Sri Mulyani said, adding she will also look to raise some cash to provide a buffer for 2024.