JAKARTA (Reuters) – Indonesia’s government is maintaining its forecast that the budget deficit will be 2.53% of GDP this year despite a 30% plunge in tax revenues in the first two months of 2025, the finance minister said on Thursday.
Southeast Asia’s largest economy ran a budget deficit of 31.2 trillion rupiah ($1.9 billion) in January to February, equal to 0.13% of gross domestic product, compared with a surplus of 26 trillion rupiah, or 0.11% of GDP, a year earlier.
“The budget posture does not change,” Finance Minister Sri Mulyani Indrawati said.
“We will maintain the deficit at 2.53% of GDP, including by considering any correction in revenues.”
Financial markets have been keen to see the budget figures after the government began the year with $19 billion of planned budget cuts, the cancellation of a tax hike and an expansion of a free school-meals programme, the signature policy of President Prabowo Subianto.
Total government revenue for January and February fell by 20.8% from a year earlier to 316.9 trillion rupiah, while spending was down 7% to 348.1 trillion rupiah.Of total receipts, tax revenues, excluding customs and excises, fell an annual 30.2% in the two months to 187.8 trillion rupiah.
The finance ministry said moderating prices of key commodities such as coal, nickel and crude oil were to blame for the drop, as well as administrative changes to the way personal income tax and value-added tax were collected.
Economic indicators such as the purchasing managers’ index, and motorcycle and car sales suggested value-added tax receipts would recover, deputy minister Anggito Abimanyu, and there would be extra effort to make up any potential losses in revenues.
In January, businesses had complained of disruption caused by a tax system upgrade, which was aimed at boosting compliance but instead suffered from outages and other problems.
Sri Mulyani said priority programmes such as school meals, the renovation of schools, and energy projects would receive more funds from the state budget.
The government would also provide funding for the new sovereign wealth fund, Danantara Indonesia, and inject capital into logistics company Bulog and three newly formed state companies in the agriculture sector.
($1 = 16,435 rupiah)
(Reporting by Stefanno Sulaiman and Gayatri Suroyo; Editing by John Mair)
