Budget deficit projected to reach 5.

7 percent of GDP in 2021 as

uncertainty hits tax revenue
Adrian Wail Akhlas The Jakarta Post

finance Minister Sri Mulyani Indrawati speaks in a hearing with House of Representatives
lawmakers in Jakarta on June 29. The government and the House have agreed to widen the
state budget deficit to 5.7 percent of gross domestic product next year. (Antara/Aditya
Pradana Putra)

Jakarta / Fri, September 11, 2020 / 05:55 pm

The government and the House of Representatives have agreed to widen the state budget
deficit to 5.7 percent of gross domestic product (GDP) next year as uncertainty surrounding
the coronavirus pandemic is expected to further affect activity and eventually tax revenue.
The coronavirus outbreak in the country has escalated economic uncertainty this year and
next, Finance Minister Sri Mulyani Indrawati said on Friday, adding that the government
would revise macroeconomic assumptions underpinning the state budget to reflect the new
reality. “We are seeing huge economic uncertainty [in 2021] and thus we will make changes
to the tax income target to reflect the situation,” she told the House’s Budget Committee
during a hearing. “We will remain vigilant and optimistic in facing these economic
challenges”. The government now expects the fiscal deficit to reach Rp 1 quadrillion
(US$67.32 billion), 5.7 percent of GDP, and increase by Rp 35.2 trillion compared to the
previous estimate of 5.5 percent of GDP, as tax income will fall further. However, the
government would maintain its economic growth target at around 5 percent, the finance
minister said, adding that no one could truly know the trajectory of the pandemic in the next
12 months. The outlook for GDP this year is within the range of a 1.1 percent contraction to a
0.2 percent expansion. The government collected Rp 601.9 trillion in taxes in the first half,
down 14.7 percent year-on-year and around 50 percent of this year’s target as business
activity cooled. Sri Mulyani said on Sept. 2 that the government expected a greater tax
shortfall this year following a change in its economic growth estimate. Next year, state
income was expected to reach Rp 1.74 quadrillion, down Rp 32.7 trillion from the previous
projection due to lower income from non-oil and gas taxes, she said. Tax income might reach
Rp 1.22 quadrillion next year, a drop of Rp 38.9 trillion compared to the previous estimate.
Meanwhile, state spending is expected to increase by Rp 2.5 trillion to Rp 2.75 quadrillion
next year, driven by higher government spending on energy subsidies, particularly for
liquefied petroleum gas (LPG), at Rp 2.4 trillion. Indonesia’s economic recovery is expected
to take longer than expected as a recent surge in virus cases has dented people’s confidence in
the economy, as reflected by recent sales data, which indicates domestic consumption
remained weak even after the economy reopened. Indonesia recorded more than 207,000
cases of COVID-19 as of Thursday with 8,456 fatalities, prompting the Jakarta administration
to reintroduce stricter social distancing measures to curb the virus spread. The city
administration would require non-essential industries to have their employees work from
home, limit the use of public transportation and forbid dining in restaurants starting Sept. 14,
similar to the restrictions imposed from April to June, Governor Anies Baswedan said on
Wednesday. The capital’s regional gross domestic product accounted for 17.17 percent of the
country’s GDP in the second quarter, the highest of any region, Statistics Indonesia (BPS)
data show. Critics of the decision say the policy might further hinder economic recovery, but
supporters of the decision say it is necessary to prevent the healthcare system from
collapsing. “The economy is more likely to contract than grow in the third quarter this year,
even without other movement restrictions,” Bank Central Asia (BCA) economist David
Sumual said on Thursday. “The economy has been losing steam since August as virus cases
jump.” Indonesia's GDP contracted 5.32 percent in the second quarter as household spending
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Epidemiologist follow our Social media the jakarta post News Business Long road to full
economic recovery as Jakarta PSBB returns Adrian Wail Akhlas The Jakarta Post Jakarta /
Fri, September 11, 2020 / 07:38 am Coordinating Economic Minister Airlangga Hartarto
gestures during the Indonesia Onward Cabinet announcement by President Joko “Jokowi”
Widodo on Oct. 23, 2019. A full economic recovery would take at least two to three years,
Airlangga said on Thursday. (JP/Seto Wardhana) 0 Shares Indonesia expects a long road to
full economic recovery after Jakarta brought back strict social restrictions measures amid a
continued rise in the number of coronavirus cases. A full economic recovery would take at
least two to three years, Coordinating Economic Minister Airlangga Hartarto said on
Thursday following the Jakarta administration’s decision to reimpose large-scale social
restrictions (PSBB) relaxed in early June. “If virus cases rise, then the economy will take a
hit. The government expects that it will take until 2022 or even 2023 [for the economy] to
return to pre-COVID-19 levels,” he told a virtual business forum held by Indonesian
Chamber of Commerce and Industry (Kadin). "The economy is not only about the
fundamental factors but also the sentimental factor, particularly in the capital market," he
went on to say, adding that "pulling the emergency brakes would need to be done by
maintaining public confidence in the economy". His statement comes as the capital is set to
require non-essential industries to have their employees work from home, to limit the use of
public transportation and to prohibit dining in restaurants starting on Monday, similar to
measures imposed from April to June, Jakarta Governor Anies Baswedan said in a press
briefing late on Wednesday. Indonesian stocks fell by more than 5 percent at closing after
hitting the circuit breaker on Thursday morning, following the announcement. The decline in
the benchmark Jakarta Composite Index (JCI) stood in contrast with gains seen in most
markets across Asia. The rupiah, meanwhile, weakened 0.38 percent against the United States
dollar to 14,855. Jakarta has recorded a daily average of over 1,000 new cases this month and
registered nearly 43,400 infections and 1,330 deaths from COVID-19 since the pandemic
began, according to government data, as the city gradually relaxes its restrictions. Indonesia
has recorded more than 203,000 cases as of Thursday with 8,336 fatalities. The capital city
contributed the most to the national economy compared to other regions in the country as
Jakarta’s regional domestic product accounted for 17.17 percent of the country’s gross
domestic product (GDP) in the second quarter, Jakarta Statistics Indonesia (BPS) data shows.
It was followed by East Java (14.6 percent) and West Java (13.45 percent), both also virus
epicenters. The government will ramp up spending to increase the capacity of hospital beds
and make vaccines available in the first quarter next year, Airlangga said. “Around 30 million
vaccine [doses] will be available by the first quarter next year at the earliest, and the rest will
follow in the second and third quarters,” he said, adding that the pandemic response and
economic recovery efforts in 2021 would be supported by efforts to vaccinate people. The
government will expand some social protection programs into next year, including cash aid
for formal workers for the first three months next year and cash transfers for micro, small and
medium enterprises (MSMEs) during 2021’s first half, Airlangga went on to say. The
government still expects GDP to grow by 4.5 percent to 5.5 percent next year as the economy
is likely to contract this year. It projects the economy to shrink by 1.1 percent at worst or
grow by 0.2 percent at best this year. “The economy is more likely to contract than grow in
the third quarter this year, even without other movement restrictions,” Bank Central Asia
(BCA) economist David Sumual told the Jakarta Post on Thursday. “The economy has been
losing steam since August as virus cases jump.” Indonesia's economy shrank 5.32 percent in
the second quarter as household spending and investment contracted. Although the country’s
healthcare facilities are better now compared to during March and April, further restrictions
by Jakarta administration will still take a heavy toll on economic activity, he went on to say.
“The severity of economic contraction would depend on how long it would take to restrict
people’s activities.” Indonesian Chamber of Commerce and Industry (Kadin) deputy
chairwoman Shinta Kamdani called on the government to pay more attention to small
businesses and large corporations. “Although domestic demand has picked up gradually, the
PSBB policy will heavily affect employment as businesses in transportation and [food and
beverages], among other sectors, will be forced to furlough their employees again,” she told
the Post. Shinta added that ensuring activity in sectors that were allowed to operate during the
PSBB policy would be key to prevent further job losses, and the government should ensure
the continuity of export-oriented manufacturing industry operations as global demand for
Indonesian goods had risen gradually. “We are trying to keep the manufacturing industry
operating amid rising global demand, and we want to ensure that their activities are not being
affected by PSBB measures.” The association, Shinta added, would seek permission from the
Industry Ministry and regional administrations, including Jakarta, to continue operations for
companies that implemented strict health protocols. Read More

This article was published in thejakartapost.com with the title "Long road to full economic
recovery as Jakarta PSBB returns". Click to read:
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jakarta-psbb-returns.html.

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