MACROECONOMICS - JAKARTA. Indonesia's parliament on Thursday approved President Joko Widodo's $190 billion budget for next year, representing a fiscal deficit of 4.85% of gross domestic product, the house speaker Puan Maharani said.
The budget aims to maintain recovery momentum in the economy in 2022 from the impact of the coronavirus pandemic and assumes growth of 5.2% next year.
At the same time, the government said it will set the groundwork to reduce the fiscal deficit to below 3% of gross domestic product in 2023 to comply with the law.
Total spending was approved at 2,714.2 trillion rupiah ($190.40 billion), slightly higher than proposed by the president last month, and compared to 2,697.2 trillion rupiah spending estimated this year. The 2022 fiscal gap is targeted at 4.85% of GDP from this year's estimated 5.82%.
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Southeast Asia's largest economy pulled out of recession in the second quarter of the year. While the recovery momentum was hit by fresh coronavirus curbs in July, the central bank said domestic activity had gradually improved since restrictions were eased in late August.
Economists have, however, warned that the government should not pull fiscal support too early in its efforts to reach the 2023 fiscal goals as it may disrupt the economic recovery momentum
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