Indonesia’s $20 Billion Budget Deficit Set to Widen Further

(Bloomberg) -- Indonesia’s budget deficit has ballooned to more than $20 billion and is set to widen further as Southeast Asia’s largest economy struggles amid a global slowdown.

With the government on pace to miss revenue targets, the 2019 budget deficit is now expected to reach as much as 2.2% of gross domestic product, from an initial target of 1.84%. Figures released Monday showed the deficit had already climbed to 289.1 trillion rupiah ($20.5 billion), or 1.8% of GDP, as of the end of October.

“This is quite a big increase in the deficit.,” Finance Minister Sri Mulyani Indrawati told reporters Monday, warning of “significant pressure” on Indonesia’s industrial sector.

Total revenue from January through October rose 1.2% from a year earlier, to 1,508.9 trillion rupiah. That’s still only about 70% of the government’s full year-target, with income-tax revenue from the oil and gas sector sliding 9.3% year-on-year. Officials expect collection to pick up in the final two months of 2019.

The budget update comes as a global slowdown continues to weigh on Indonesia’s economy, which grew in the third quarter at its slowest pace in more than two years. The government has revised down its full-year growth forecast several times, now projecting the economy to expand 5.1%, compared to an initial estimate of 5.3%.

“We will tightly monitor the slowing global growth,” Indrawati said.

With the government struggling for revenue, Indonesia’s net issuance of bonds has already hit 401.7 trillion rupiah, more than the full-year target, Deputy Finance Minister Suahasil Nazara said Monday. The government is ready to issue more bonds or take more loans if necessary to ensure it can execute its spending plans, he said.

Indonesia’s budget deficit this year may end up reaching the “upper end” of the new target of 2%-2.2% of GDP, Nazara said. By law, the deficit can’t surpass 3% of GDP.

To contact the reporters on this story: Viriya Singgih in Jakarta at vsinggih@bloomberg.net;Karlis Salna in Jakarta at ksalna@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Michael S. Arnold

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