JAKARTA: Indonesia's parliament on Tuesday (Sep 29) approved President Joko Widodo's US$185 billion budget for 2021, which his finance minister described as both supportive for Southeast Asia's largest economy and also the start of a fiscal consolidation.
The budget, which has a smaller fiscal deficit than this year, was approved by acclamation in parliament.
Total spending for 2021 was agreed at 2,750 trillion rupiah ($185.25 billion), 0.4% bigger than the 2020 budget, but the deficit forecast for 2021 was smaller at 5.7% of gross domestic product, compared with 6.34% this year.
This year's budget deficit outlook is the biggest in decades because of increased spending to respond to the coronavirus pandemic.
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Indonesia's economy is set to shrink for the first time since the 1998 Asian financial crisis because of the pandemic this year, within a range of -1.7 per cent to -0.6 per cent. The 2021 budget assumes economic growth will rebound to 5 per cent, said Finance Minister Sri Mulyani Indrawati.
"The 2021 budget is supportive and consolidative. Supportive meaning it will continue to support economic recovery … and consolidative meaning the deficit is smaller," she said in a virtual news conference after the budget was passed.
She said the fiscal consolidation would begin next year to meet a self-imposed target to bring the budget deficit to below 3 per cent of GDP by 2023, but pledged the government would try to maintain growth momentum.