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Indonesia posts narrowest budget deficit in 2018

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JAKARTA: Indonesia posted its smallest fiscal deficit in six years in 2018 and less than initially projected, despite turbulence in its financial markets due to capital outflows, its finance minister said on Wednesday.


The estimated budget gap last year was equal to 1.76 per cent of gross domestic product (GDP), narrower than both the government’s original plan of 2.19 per cent and the latest previous estimate of 1.83 per cent, making it the smallest deficit since 2012, Sri Mulyani Indrawati told a news conference.


“This is the first time since 2012 that state budget revenues were bigger than targeted,” Indrawati said of the 2,202.2 trillion rupiah ($152.45 billion) budget.


The former World Bank managing director initially said in a Facebook post the deficit was 1.72 per cent and that the budget had a surplus in its primary balance, or budget balance before interest payments. At the news conference, she said the primary balance was still in the negative but was moving closer to zero.


Southeast Asia’s largest economy saw its rupiah currency plunge to the weakest in 20 years in 2018 due to capital outflows linked to worries about its twin deficits, US interest rate increases and concerns about the fallout for Asia from the US-China trade war.


However, inflows towards the end of the year bounced it back and the currency closed the year 6 per cent weaker compared to end-2017.


Authorities’ policy responses to the falling rupiah, which include jacking up interest rates, raising import taxes and delaying infrastructure projects, might hurt GDP growth, Indrawati said.


She estimated the economy expanded 5.15 per cent in 2018, marginally better than 2017’s 5.07 per cent but slower than the official target of 5.4 per cent.


But despite the slower-than-expected growth, tax collection was boosted by “an increase in compliance” after a 2016-7 tax amnesty, she said.


Higher prices of coal and crude oil also pushed government revenues up, Indrawati said, offsetting oil and gas lifting that missed target. — Reuters



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