A view of Jakarta business district skyline from Petamburan, West Jakarta on Tuesday. (Antara Photo/Aditya Pradana Putra)

Indonesia Keeps Deficit High in 2021 as Covid-19 Uncertainties Persist


JULY 29, 2020

Jakarta. The government has decided to widen the 2021 state budget deficit to 5.2 percent of Indonesia's gross domestic product from its initial plan of 4.3 percent to finance increases in spending in critical sectors for economic recovery amid uncertainties caused by the Covid-19 pandemic. 

Finance Minister Sri Mulyani Idrawati said on Tuesday the widening deficit allowed the government to add Rp 179 trillion ($12.2 billion) in spending for food security, telecommunication, industrial estates, education, and healthcare next year

Sri Mulyani identified three uncertainties that prompted the government to widen the deficit, with one being the speed of Covid-19 vaccine development. The global economic recovery would also weak next year, with many international institutions revised down their growth projections. 

Lastly, domestic economic recovery in the third and fourth quarters this year would depend mainly on how the Covid-19 handling would go hand in hand with efforts to reopen the business activities, Sri Mulyani said. Today, the government still expected a 0.3 percent growth in the third quarter this year and a 3 percent increase in the fourth quarter, after a 4.3 percent contraction in the second. 


This year, the government set a deficit of Rp 1,033 trillion, or 6.34 percent of the country's GDP, to fund its Covid-19 mitigation efforts. 

President Joko "Jokowi" Widodo was scheduled to submit the 2021 state budget proposal to the House of Representatives on Aug 16 right after delivering the President's annual State of the Nation address. 

"For the overarching program, the President wanted to focus on food security. That is the highest priority," Sri Mulyani said. 

Therefore, there would be an increase in spending on agriculture, environment, public works, agrarian, and maritime affairs ministries, Sri Mulyani said. The President also asked the ministries to come up with programs that can open job opportunities. 

"That because the purpose of the 2021 state budget is not only to achieve growth but also to reduce poverty," Sri Mulyani said. 

Secondly, the government seeks to spend on the development of industrial estates. "The goal is to attract investment in manufacturing industries so that they can create more jobs," she said. 

Jokowi also wanted to improve connectivity across Indonesia, by equipping all schools and community health centers (Puskesmas) with a reliable internet connection. 

Lastly, spending on education and health sectors would increase automatically in line with the widening deficit. Indonesia's laws cap education spending to at least 20 percent of the state budget, while healthcare spending must reach 5 percent of the annual budget. 

"There will be an additional Rp 30 trillion for education and Rp 9 trillion for healthcare available [next year]," Sri Mulyani said.