Indonesia expects economy to firmly recover in 2021, budget deficit to swell

Source: Xinhua | 2020-08-15

Indonesia has estimated the economy would firmly recover next year and the deficit of the development budget would swell from the initial plan amid the expectation that the COVID-19 vaccine would be ready for usage.

Indonesian President Joko Widodo on Friday proposed to the country's parliament 4.5 to 5.5 percent economic growth next year after the finance ministry projected the growth to be nearly flat this year.

The strides to respond to the risks of the virus pandemic, including to packages of the economic stimulus and social safety as well as financing of massive production of the COVID-19 vaccine and its tests, has led the government to widen the development budget deficit to 5.5 percent of the GDP or 971.2 trillion rupiahs (some 65.11 billion U.S. dollars) next year from 5.2 percent initially projected last month, according to the proposal.

Still, the figure is lower than 6.34 percent of the budget deficit expectation for this year.

President Widodo, popularly known as Jokowi, pledged to continue efforts to shore up the economy which has been dashed by the novel coronavirus.

Jokowi proposed a 2,747.5 trillion rupiah (about 184.19 billion U.S. dollars) spending next year, which is 0.3 percent higher than this year's spending plan.

"The state budget proposal for 2021 is designed to speed up recovery of the economy which has been ravaged by the COVID-19 pandemic," Jokowi said in an annual budget speech before the parliament ahead of the Independent Day celebration on Aug. 17.

The purchasing power would be boosted by maintaining the inflation at three percent, the proposal said.

About 6.2 percent of the development budget would be allocated to the health sector, including to the financing the procurement of the COVID-19 vaccine, which is expected to be massively produced early next year.

The social safety net to offset risks of the virus pandemic would continue next year with a total funds of 419.3 trillion rupiahs (some 28.11 billion U.S. dollars).

A total fund of 414 trillion rupiahs (about 27.75 billion U.S. dollars) is allocated for infrastructure, it said.

As the Indonesian economy decelerated 5.32 percent in the second quarter, the government vowed to speed up spending and stimulus package disbursement at the rest of this year in a bid to shore up the growth, according to finance minister Sri Mulyani Indrawati.

The upbeat sentiment over the reliability of the COVID-19 vaccine has offset the concern of the fast virus transmission as of late.