Indonesia’s finance minister Sri Mulyani Indrawati expects higher revenue from an economic rebound, tax reforms, and increasing commodity prices. Hence, Indrawati narrowed her projection for the budget deficit for 2021 to 5.3% to 5.4% of GDP from her previous estimate of 5.8%. For 2022, the minister said the deficit could be smaller than the 4.85% of GDP stated in the state budget. She added that Indonesia’s economy might have hit 5% in the third quarter and pick up again this quarter thanks to a quick recovery from its worst COVID-19 outbreak.
The Indonesian government plans to return its fiscal gap to below the legal cap of 3% of GDP by 2023. It removed the cap temporarily in 2020 to fund stimulus measures to cushion the economic shock on people and businesses from the pandemic. The country’s lawmakers recently approved a tax overhaul, which includes an additional top income bracket, an increase in value-added tax, carbon tax, and a tax amnesty program. The reform is expected to increase revenue by 1% of GDP in 2022 and raise the country’s tax-to-GDP ratio to more than 10% in less than five years.
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Published on October 18, 2021 11:35 AM (GMT+8)Last Updated on October 18, 2021 11:35 AM (GMT+8)
