Fiscal Update Indonesia: Budget Deficit at 2.57% of GDP (Unaudited)
At a news conference on Tuesday (02/01), Indonesian Finance Minister Sri Mulyani Indrawati said Indonesia's unaudited budget deficit reached 2.57 percent of the country's gross domestic product (GDP) in 2017, slightly below expectations at 2.60 percent of GDP, and well below the government's 2.92 percent (revised) target. In 2016 the government budget deficit was recorded at 2.49 percent of GDP.
The government target of 2.92 percent was rather high considering the legal cap is set at 3.0 percent of GDP (a measure of prudent fiscal policy-making introduced after the devastating Asian Financial Crisis in the late 1990s) and therefore the government seemingly anticipated non-optimal government spending.
Government spending only reached 93.8 percent of the target (7.4 percent higher than in the preceding year). Infrastructure development was one of the top priorities, Indrawati added. Spending on infrastructure involved - among others - the construction of 794 kilometers of (toll) roads, a total of 9,072 meters of bridges, and 11 airports across the nation. Infrastructure spending will also remain a top priority for the government in 2018.
Meanwhile, government revenue came in slightly better (compared with spending) at 95.4 percent of the target that was set in the (revised) 2017 state budget.
Government revenue improved from a year ago amid modestly accelerating economic growth, higher commodity prices, and improving tax collection. Tax revenue realization in full-year reached 91 percent of the target (unaudited), higher than the 83 percent-figure in the previous two years.
Finance Minister Indrawati also told reporters that Indonesia's economic growth is estimated at 5.05 percent (y/y) in full-year 2017, down from the government's 5.2 percent (y/y) growth assumption in the 2017 state budget and only constituting a modest acceleration from the 5.02 percent (y/y) growth pace in 2016.
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