In October 2016 Indonesia's House of Representatives (DPR) approved the 2017 State Budget (APBN 2017) in a plenary session. With the economic growth target set at 5.1 percent year-on-year (y/y), government spending at IDR 2,080.5 trillion (approx. USD $160 billion), government revenue at IDR 1,750.3 trillion (approx. USD $135 billion), and the government's budget deficit at 2.41 percent of gross domestic product (GDP), the 2017 State Budget is considered realistic.

Delivering a realistic state budget is a good development and constitutes a break with the recent past. A realistic budget implies that chances are much bigger that targets will be achieved at the year-end. This would enhance Indonesia's fiscal - and overall - credibility. In recent years the government had set unrealistically high targets in terms of state revenue (especially tax revenue). Although it is important to set high targets in order to optimize efforts, it can backfire when targets are set too high as officials and other people realize these targets cannot be achieved even if they would perform at their maximum level. Moreover, as mentioned above, it undermines credibility when targets are not met for many years in a row.

A realistic 2017 State Budget with the GDP growth target at 5.1 percent (y/y) is a sign that the government of Indonesia prefers to "over-deliver" rather than "under-deliver" next year. The World Bank put its forecast for Indonesia's economic growth in 2017 at 5.3 percent (y/y) in its October Indonesia Economic Quarterly report. Usually, it is the other way around: the Indonesian government tends to have a growth target in the state budget that is higher compared to forecasts from institutions such as the World Bank and the International Monetary Fund (IMF). As such the 2017 State Budget is an interesting - and good - change of tactics

Macroeconomic Assumptions:

  Macroeconomic Assumptions
          2017 State Budget
2016 State Budget
Government Revenue
in IDR trillion
                  1,750.3             1,822
Government Spending
in IDR trillion
                  2,080.5             2,096
Budget Deficit
% of GDP
                     2.41              2.15
GDP Growth
annual percent change
                      5.1               5.3
annual percent change
                      4.0               4.7
Exchange Rate
                   13,300            13,900
3-Month Notes
coupon (%)
                      5.3               5.5
Crude Oil Price
in USD per barrel
                      45               50
Oil Lifting
barrels of oil per day
                  815,000           830,000
percentage of labor force
percentage of population

Sources: Finance Ministry & Commission XI DPR