Indonesia Parliament approves 2021 budget, aims for 5 pct growth

JAKARTA (BLOOMBERG) – Indonesia’s parliament approved a state budget for 2021 that seeks to bring the economy back to 5 per cent growth.

Lawmakers agreed to formalise the budget into law at a plenary meeting on Tuesday (Sept 29). State spending is set at a record high 2.75 quadrillion rupiah (S$254 billion) for next year, with the economic growth assumption set at 5 per cent and the fiscal deficit seen at 5.7 per cent of gross domestic product.

Next year’s projection will be supported by a recovery in domestic consumption as economic activity returns to “a new normal state”, as well as a rebound in the global economy, said Finance Minister Sri Mulyani Indrawati.

The decision to maintain next year’s growth target comes days after policy makers slashed the 2020 forecast, with the economy now expected to show its first annual contraction since the Asian financial crisis more than two decades ago. The world’s fourth-most populous nation is grappling with a worsening coronavirus outbreak that has already killed more than 10,000 people, while factories struggle to stay open and consumers steer clear of shops and restaurants.

The central bank will remain a standby buyer for as much as 25 per cent of government debt through 2022, Governor Perry Warjiyo told parliament on Monday. Bank Indonesia might also continue its “burden-sharing” program if the 397.56 trillion rupiah it allocated for this year isn’t fully realised, he said, without specifying if he’s referring to direct purchases of government bonds by the central bank.

Bank Indonesia and the Finance Ministry have repeatedly said the program to buy bonds directly from the government is a one-off move amid the pandemic. So far, the central bank has bought 183.48 trillion rupiah of bonds directly from the government.

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