Finance Minister Sri Mulyani Indrawati Reported Indonesia's 2018 State Budget Deficit 1.76%, the Lowest Level Since 2012 - Photo by the Ministry

JAKARTA (TheInsiderStories) — Indonesia’s 2018 State budget deficit narrowed down to Rp259.9 trillion (US$17.92 billion) or 1.76 percent to Gross Domestic Product (GDP), the lowest record since 2012, said senior official today (01/02). It is also lower than the this year’ target at 2.19 percent.

Finance Minister Sri Mulyani Indrawati explained, the humble budget deficit is caused the revenues exceeded 102.5 percent to Rp1,942.3 trillion, while the expenditure recorded 99.2 percent of this year target at Rp2,202.2 trillion.

Besides, the primary balance negative Rp1.8 trillion. She claimed the number as nearly zero.

The minister realised, that 2018 was not an easy year, amid global economy turmoil, unstable commodity price, sluggish foreign inflow, depreciated Rupiah against US dollar, and central bank reference rate hike.

But, she optimistic with this 2018 State Budget achievement, that her ministry will be ready to face 2019. However, the minister still warned that all parties would remain vigilant, given there is still global and domestic uncertainty in this year.

For example, she revealed, there is still the threat of a trade war between America and China also its strategic trading partners. Moreover a fluctuations in oil prices and other macroeconomic indicators.

“2019 is not a year that we imagine will be much lighter. But we are not burdened. For 2019 we enter, God willing, with all the feeling of optimism. But still we have high caution and caution,” said Indrawati.

Meanwhile, the Coordinating Minister for Economic Affairs Darmin Nasution assured that the government is trying to reduce the inflation rate in 2019 not exceed 3 percent. Today Statistic Indonesia reported the country’ inflation lowered to 3.13 percent from a year ago 3.61 percent.

The same estimation come from the economist of Institute for Development of Economics and Finance Bhima Yudhistira. He rated, the inflation rate in 2019 will still be at 3.5 percent amid the slow down commodity prices. In addition, in this political year, the government will try to maintain fuel prices and electricity tariffs, he added.

While, Head of Macroeconomics and Strategy Director of PT Bahana TCW Investment Management Budi Hikmat assessed, the global economic and geopolitical situation will further support the return of foreign capital inflows into Indonesia.

Various external sentiments, include the political situation in the United States after the victory of the Democrats in the midterm elections in 2018, which will balance President Donald Trump’s economic policies.

Furthermore, he rated, the strengthening of US dollar throughout 2018 actually tends to increase the US trade deficit against China. In addition, the tension of the US trade war with China seems to be more relaxed with the existence of a ceasefire and domestic political pressure experienced by Trump.

While, the current account of China is expected to score a negative number for the first time in 2019. This risks triggering the potential weaken the Chinese yuan.

Meanwhile, global investors rated the US economic condition has passed its peak and began to slow even though it remains fairly strong. Moreover, the policy of the Federal Reserve (Fed) is projected to continue to tighten liquidity even though it is not as fast as in 2018.

After raising interest rates by 100 basis points this year, the Fed monetary policy seems to be neutral next year, referring to higher interest rates on the US inflation rate in the range of 2.2 percent, the highest among developed countries.

“There is a potential for the Fed to only need a maximum of two increases during 2019,” he said in a written statement.

On the other hand, the market expaect the European Central Bank (ECB) will follow the Fed in ending quantitative stimulus this year, and raise interest rates towards the end of the year. This is supported by indicators of economic strengthening in the European Union.

To ease the external pressure, Hikmat hoped the policy makers to boost the purchasing power and increase productivity, both in the manufacturing and tourism sectors.

He projects during 2019, the Rupiah will move in the range of 14,350 to 15,200 over the greenback. Conservatively, the projection has included the possibility of the dollar regaining strength by 2 percent and the cost to income commodity ratio up by 5 percent.

On the stock market, Bahana TCW assesses the potential increase is determined by earning growth rather than dignity (price earnings ratio re-rating). By assuming a 12 percent profit growth, he estimates that the Jakarta Composite Index at the end of 2019 will be around 7,000.

US$1: Rp14,500

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