President Joko Widodo Give his Direction for 2019's State Budget at the Bogor Palace (18/07) - Photo by President Office
Bogor (TheInsiderStories) – Indonesian Finance Minister Sri Mulyani Indrawati sees the country’s economic growth 5.3 percent in 2019, lowered from this year target 5.4 percent. In the 2019’s State Budget proposal to the parliament, government set the economic growth in the range 5.2 to 5.6 percent.
Spoke to the media on Tuesday (18/07) after a plenary meeting at the Bogor Palace, the minister said for the first time Indonesian gross domestic products reached Rp2,000 trillion (US$139.86 Billion). This year the country’s GDP is estimating around Rp1,900 trillion.
Based on the latest development, she continued, government also has plan to revise some macro assumptions like the exchange rate and the oil price benchmark. Government to set the Indonesian Crude Price (ICP) at US$70 a barrel from first plan $53 per barrel but still reviewing the latest updates for Rupiah rate.
“Were looking for the latest updates, depending on this month’s circumstances and the trend of the Fed’s (chairman Jerome Powel) statement that saying to raise the interest rates cause the United States economic data is quite positive. It should be anticipated,” said Indrawati.
She also give a signal, the exchange rate assumption could be higher from the initial planned in the range Rp13,700 to Rp14,000 over the U.S dollar. So far, the Rupiah has slid to its weakest in more than two years in recent monthsw as global investors pull out funds from emerging markets.
Indonesia’s average annual growth rate was 5.6 per cent in the period 2001-12, equivalent to a GDP per capita of about $3,500. According to Indrawati, one of the efforts to boost economic growth is by prioritizing value-added economic sectors to make domestic markets more robust and to promote productivity.
Furthermore, the former World Bank’s chair said, the government will design the state budget with a deficit below than 2 percent, but enough to keep stimulating the economy. This year, she predicted the budget deficit 2.12 of the 2018’s GDP.
On the spending side, Indrawati explained that president urged his ministers to sharpen the ministry and government institution spending. Based on the latest, she added, there are about Rp34,1 trillion from the initial indicative ceiling to be reallocated for priority spending like school facilities and vocational school.
Meanwhile, the government revenues is expect to rise 15 percent compared to this year target Rp1,894.7 trillion.
1H Realization
Indrawati has reported the realization of 2018’s State Budget in the first semester (1H) grew higher than the same period of last year with investment performance as the main driving force. The increase in investment activity is also in line with double-digit import growth driven by an increase in imports of capital goods for infrastructure supporting materials.

The realization of State revenues reached 44 percent of this year target or rose 16.04 percent compared to last year. The realization of tax revenue collected Rp653.49 trillion, non-tax revenues of Rp176.83 trillion and grants of Rp3.12 trillion or 40.39 percent, 64.20 percent and 260, respectively, or 70 percent of 2018’s target.

While, the realization of government spending in the 1H 2018 reached Rp944.01 trillion, or about 42.51 percent of the ceiling, an increase of 5.67 percent compared to the same period last year. The realization of the State expenditure includes Central Government Expenditures of Rp558.44 trillion and Transfers to Regional and Village Funds of Rp385.57 trillion.

The budget deficit in the 1H of 2018 recorded 0.75 percent to GDP or Rp110.56 trillion. In the same period the budget deficit in 2017 amounted to 1.29 percent to GDP or Rp175.1 trillion.

Although the budget is still experiencing a deficit, the primary balance until June of 2018 is still positive at Rp10.05 trillion compared to the same period in 2017 negative Rp68.25 trillion.

In line with the increasingly credible management of the state budget, in the 1H of 2018 there was a Remaining More Budget Financing Rp65.68 trillion.

Commenting on the State Budget performance, Chief Economist of Mandiri Sekuritas Leo Putera Rinaldy stated, its clear that the government aims to maintain manageable fiscal statue, especially through its effort to reach positive primary fiscal balance.

In fact, he said, the tax revenue growth is recently two times larger than the total government expenditure, given the government’s efforts to maintain fiscal deficit at 2.2 percent and to reverse primary balance into positive territory.

In his eyes, any risk on potential spending cut will be sourced from public investment considering government’s focus on supporting purchasing power.