Indonesia Expands Budget to Record $193 Billion to Fight Virus

(Bloomberg) -- Indonesian President Joko Widodo approved a revised budget that lifts government spending to a record $193 billion this year as Southeast Asia’s largest economy steps up efforts to cushion the impact of the coronavirus pandemic.

State expenditure will climb to 2,739.2 trillion rupiah ($193 billion), up from 2,613.8 trillion rupiah estimated at the end of March, according to a decree signed by Widodo on June 24. With revenue set to slide to 1,699.9 trillion rupiah from 1,760.9 trillion rupiah seen earlier, the budget deficit is set to balloon to 1,039.2 trillion rupiah, or 6.34% of gross domestic product this year.

The pandemic has battered Indonesia’s economy, prompting policymakers to earmark 695.2 trillion rupiah for virus relief and scrap the fiscal deficit ceiling to facilitate bigger spending to soften the blow to businesses and minimize job losses. The fiscal stimulus measures may help a recovery in growth from the third quarter after it’s seen contracting about 3.8% in the April-June period, Finance Minister Sri Mulyani Indrawati said this week.

With the pandemic showing no signs of slowing amid easing of social distancing restrictions and a ramp-up in testing, the economic recovery may be gradual and less than forecast previously, according to Ahmad Nazmi Idrus, an economist at RHB Investment Bank. RHB cuts its GDP growth forecast to -1% this year from an expansion of 1% previously.

“High uncertainties remain due to the rising number of Covid-19 cases,” Idrus wrote in a note Friday. “This could force the government to maintain some form of restrictions, further suppressing growth.”

The number of coronavirus cases in the world’s fourth-most populous nation topped 50,000 with the death toll reaching 2,620, official data showed Thursday. The tally is the highest among Southeast Asian nations, according to data from Johns Hopkins University.

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