Weak Rupiah and Global Economy Enlarge Indonesia's Budget Deficit
The outcome of Indonesia's 2014 budget deficit is expected to be higher than initially planned in the 2014 State Budget Draft (RAPBN 2014). In the 2014 draft, the deficit is proposed to amount to IDR 154.2 trillion (USD $13.6 billion), or 1.49 percent of Indonesia's gross domestic product (GDP). However, the government's latest estimate indicates a widening of the deficit to IDR 209.5 trillion (USD $18.5 billion), equivalent to 2.02 percent of GDP. The wider deficit is mainly caused by Indonesia's depreciating rupiah as well as the weak global economy.
The combination of the weakening rupiah and international financial turmoil results in expensive government expenditures, particularly subsidy spending. Moreover, state income from the tax sector is assumed to decline sharply. In total, the government expects state revenues to fall by IDR 22.2 trillion compared to the figure that is mentioned in the 2014 State Budget Draft. The greatest decline is seen in tax income, which is believed to fall by IDR 35.9 trillion compared to the original assumption. However, this decrease is slightly obscured by an increase in non-tax state revenues. The latter is likely to increase by IDR 17.1 trillion from the initial target.
In contrast, state spending will increase by IDR 33 trillion from the figure proposed in the 2014 State Budget Draft. The largest increase in spending occurs in energy subsidies, especially fuels. As such, the sharply weakening rupiah this year is a major concern as it results in expensive oil imports.
Lastly, fund transfers from the central government to the regional governments decreases by a total of IDR 11.6 trillion.
The Indonesian government will bring these revised projections to a budgeting working committee for further evaluation and analysis, before it is recorded in the 2014 State Budget.
| 2014 Budget Draft | Revised Estimate | Difference |
|
| • State Income |
1,662.5 | 1,640.3 | (22.2) |
| I. Income Domestic |
1,661.1 | 1,638.9 | (22.2) |
| a. income from tax |
1,310.2 | 1,270.9 | (39.4) |
| b. non-tax income | 350.9 | 368.1 | 17.1 |
| II. Gifts | 1.4 | 1.4 | - |
| • State Expenditures | 1,816.7 | 1,849.8 | 33.0 |
| I. Central Government Spending | 1,230.3 | 1,274.9 | 44.6 |
| a. Expenditure Ministries/Agencies | 612.7 | 612.1 | (0.6) |
| b. Expenditure Non Ministries/Agencies | 617.7 | 662.9 | 45.2 |
| 1. Energy Subsidies Spending | 284.7 | 328.7 | 22.1 |
| - Fuels/LPG | 194.9 | 230.8 | 35.9 |
| - Electricity | 89.8 | 98.0 | 8.2 |
| II. Transfer to Regions | 586.4 | 574.8 | (11.6) |
| Primary Balance | (34.7) | (88.8) | (54.1) |
| Deficit | (154.2) | (209.5) | (55.3) |
| Percentage of GDP | (1.49) | (2.02) | (0.53) |
in trillion IDR rupiah