Indonesia’s 2023 State Budget Can Reach Rp. 3000 Trillion

state budget

The government targets state revenues in the APBN to approach Rp. 3000 trillion next year. Therefore, this year is the last year for the Indonesian government to be flexible in disbursing fiscal. With the implementation of Law No. 2 of 2020, the APBN deficit must return to below 3% of gross domestic product (GDP) in 2023.

The government is also required to accelerate state revenues accompanied by spending savings. However, the government is optimistic that during recent positive economic growth, next year’s economic growth could touch 5.3% to 5.9%.

BCA Chief Economist David Sumual explained that one of the government’s spending priorities on infrastructure, which is budgeted at Rp 367 trillion to Rp 402 trillion, is expected to be a multiplier effect on the economy.

Although said David, there are concerns that the state budget deficit in 2023 is targeted at Rp 562.6 trillion – Rp 596.7 trillion or 2.81% – 2.95% of GDP, but people’s mobility has started to revive again. This means that there is still hope for the Indonesian economy next year, as long as the transmission of Covid-19 can be handled properly.

“I see that mobility is getting better, the consumer sector will continue to increase. The consumption sector is around 60% of GDP, it will definitely influence our recovery,” explained David, quoted on Tuesday (19/4/2022).

Credit growth, according to David, is also expected to be better next year, as the pandemic begins to subside. Overall the economy, starting in the middle of this year and next year started relatively well.

However, prices regulated by the government or administered prices must remain stable. Indeed, there are plans from the government that there will be price adjustments for Pertalite type fuel oil (BBM), 3 kg LPG, and electricity tariffs.

“Don’t let the adjustment create an economic shock, it must be done gradually,” he said.

In the 2023 APBN, the government also targets state revenues of Rp 2,255.5 trillion – Rp 2,382.6 trillion, and expenditures of Rp 2,818.1 trillion – Rp 2,979.3 trillion.

Next year’s revenue growth will increase by 22% – 29% from the 2022 state budget target. According to David, next year’s revenue will still be supported by high commodity prices. Considering that various European countries have called out not to import coal from Russia and Indonesia as a coal exporter is expected to welcome the market from Europe.

However, the state revenue, which will grow by 20 percent next year, is considered very ambitious. The reason is that in the last four years, the country’s growth has never reached such a high figure.
On the other hand, Indonesia’s Core Economist Yusuf Rendy Manilet explained that in 2018, for example, state revenue growth reached 14.3% or grew in double digits. However, in that year, the country’s growth was still contributed by the high windfall in commodity prices.

“Last year was the same. So it’s interesting how well the government can push for double-digit growth without expecting a windfall,” said Yusuf.

The government seems optimistic that state revenues can grow 22% – 29% due to the increase in the VAT rate to 11%, the implementation of the carbon tax, and the increase in excise tariffs on tobacco products. However, according to Yusuf, as long as the recovery process has not gone well and the tax administration has not been optimal, the business will not be able to sustain revenue until it grows 20% in 2023.

In contrast to David’s view, Yusuf views that the ‘blessing’ of receiving high commodity prices may only be completed this year. This is because the high volatility of commodity prices does not only come from geopolitical sentiment, but also from other sentiments that can influence it.

Meanwhile, next year’s growth in state spending is minimal, only up 3.82% – 9.76% from the 2022 state budget target. Yusuf Rendy assesses that the contribution of government spending to economic growth will be smaller.

However, according to Yusuf, spending items for investment and infrastructure development have a significant impact on investment growth, the trend of which can return to what it was before the pandemic occurred.