Indonesian Budget Deficit Forecast for 2015
Jakarta. The government on Tuesday forecast a widening budget deficit next year on rising fuel subsidies, which could pose a problem for the new president amidst a global economic slowdown.
"The fiscal deficit in 2015 will remain expansive but measured. That will translate into a budget deficit of between 1.7 percent to 2.5 percent of gross domestic product," Finance Minister Chatib Basri said.
Chatib's remarks were made during a plenary session at the parliament building, where he presented next year's budget to lawmakers. Lawmakers are expected to deliberate the budget later this year.
The government also forecast the economy to expand at a range of 5.5 percent to 6 percent next year.
Economic growth is one of the seven parameters used in calculating the state budget.
Other parameters include inflation, the rupiah exchange rate against the US dollar, oil prices, oil production and three-month treasury bills.
The government set the inflation rate in the range of 3 percent to 5 percent for next year. The rupiah is assumed to trade between 11,500 and 12,000 against the dollar.
The rupiah, which has gained 6.1 percent this year, was traded at 11,441 against the greenback on Tuesday.
The government also the set the three month bills at between 6 percent to 6.5 percent, oil price is set at between $95 to $110 per barrel and oil production is estimated to reach 900,000 barrels per day.
David Sumual, chief economist of Bank Central Asia, said the government needed to cut the ballooning subsidy.
"If not, our deficit would swell even more. The government needs to revise its targets and expenses," he said. Typically the government sells rupiah and dollar-denominated bonds to help plug its ballooning budget deficit.
The government, which has cut growth forecast to 5.5 percent from the original target of 6 percent this year, forecast the deficit at 1.7 percent of GDP this year or equal to Rp 175 trillion ($15 billion).
A widening deficit for next year would mean that the figure would be greater.
Chatib did not provide the numbers at the parliament building on Tuesday.
Indonesia's $877 billion economy, which expanded 5.8 percent last year, grew at its slowest pace of 5.2 percent in the first quarter this year.
Chatib noted that the falling rupiah will increase the cost of fuel subsidies.
"For a deviation of Rp 100 [in the currency rate], the cost of fuel subsidies will increase by Rp 3 trillion. So roughly, the cost of fuel subsidies will increase by Rp 36 trillion."
The government allocated Rp 210.7 trillion to finance fuel subsidies this year, while a further Rp. 71.3 trillion is allotted for electricity subsidies.
Chatib noted that the budget cut was necessary to help the next administration.
Posted by: "Sunny" <ambon@tele2.se>
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