Indonesia 2019 fiscal deficit seen widening up to 2.2% of GDP, says official

Jakarta

INDONESIA'S fiscal deficit in 2019 is seen widening to around 2.0 per cent-2.2 per cent of gross domestic product (GDP), a finance ministry official said on Friday, instead of the 1.93 per cent forecast earlier as the government struggles to collect revenues.

Luky Alfirman, the head of the department in charge of deficit financing, said that markets should not worry about the health of the budget, stressing that government spending would still be used in a "counter cyclical fashion, but prudently".

There would not be any budget cut for productive spending, but some operational allocations may be slashed, Mr Alfirman said in a news conference, without providing details.

Officials at the ministry had hinted that they prefer to widen the deficit to support South-east Asia's largest economy, instead of cutting spending, amid what Finance Minister Sri Mulyani Indrawati called "huge pressure" on revenue collection.

Indonesia's economic growth is expected to slow for the first time in four years in 2019 - to 5.1 per cent from 5.2 per cent last year - due to weak investment and falling exports. The revenue target in the 2019 budget was set with a growth target of 5.3 per cent.

Mr Alfirman declined to say how much more the government would look to raise in the bond market to finance the deficit.

On Friday, his department announced Indonesia had raised US$2.1 billion equivalent from sale of euro- and US dollar-denominated bonds. Settlement for the transactions is set for Oct 30.

The Asian Development Bank on Friday separately said it has approved a US$500 million loan for Indonesia to improve fiscal management and the quality of public spending in healthcare, education, social protection and infrastructure.

The government projection of a fiscal deficit of 1.76 per cent of GDP for 2020 is unchanged, Mr Alfirman said. REUTERS