JAKARTA: Indonesian President Joko Widodo presented a proposed 2017 budget that lifts spending a little while looking realistic about revenue and seeking to contain the country’s fiscal deficit.
Economists said the budget proposal given parliament on Tuesday is more realistic than the previous two Widodo presented after his 2014 election.
Tax targets in the earlier budgets were highly ambitious, and in 2015, there was a revenue shortfall of nearly $20 billion. In the 2017 proposal, Widodo aims to balance the desire to give the sluggish economy some stimulus while not spending far more money than the government has.
“The budget is a largely pragmatic one, with realistic macroeconomic expectations and more grounded revenue and expenditure assumptions,” said Wellian Wiranto of OCBC in Singapore. The proposal was unveiled three weeks after well-respected World Bank managing director Sri Mulyani Indrawati returned home as finance minister, a post she held for some years under Widodo’s predecessor.
The budget “looks to have Sri Mulyani’s fingerprints all over it, and probably carries the spirit of being better to over-deliver than to over-promise,” Wiranto said.
Only days after returning, Indrawati cut $10 billion from the 2016 budget to ensure the fiscal deficit does not breach the 3 percent of gross domestic product (GDP) legal limit.
Even with those cuts, the deficit is likely to be 2.5 percent this year. The 2017 plan sees a deficit of 2.41 percent and assumes the economy will grow 5.3 percent.
