Indonesia books smallest fiscal deficit in 12 years in 2023

By Stefanno Sulaiman and Gayatri Suroyo

JAKARTA (Reuters) -Indonesia has reduced its 2023 budget deficit significantly to 347.6 trillion rupiah ($22.48 billion), equivalent to 1.65% of gross domestic product (GDP) based on unaudited figures, its finance minister said on Tuesday.

As a percentage to GDP, the deficit was the slimmest since 2011. In nominal terms, it was significantly smaller than the government’s original 2023 fiscal deficit plan of 598.2 trillion rupiah, said Sri Mulyani Indrawati.

Indonesia’s fiscal deficit in 2022 stood at 2.35% of GDP.

The government plans to spend $216 billion this year, with a fiscal deficit oulook of 2.29% of GDP.

Total spending last year reached 3,121.9 trillion rupiah ($201.87 billion), 0.8% up from 2022. Total revenues stood at 2,774.3 trillion rupiah, above target and representing a 5.3% gain from the previous year.

“The positive performance of the 2023 budget will be a good foundation for 2024, to guard the economy in 2024 against political cycle and geopolitics,” Sri Mulyani said, referring to Indonesia’s general elections due in February and rising geopolitical tensions in other countries.

Indonesia has been trying to cut its fiscal deficit to navigate rising borrowing costs globally and better manage its debt after large expenditure during the COVID-19 pandemic.

The small deficit in 2023 came even as economic activity in Indonesia slowed with its exports shrinking amid falling commodity prices and weakening global trade.

Growth in Southeast Asia’s largest economy likely decelerated to around 5% in 2023 from 5.3% in the year earlier, Sri Mulyani said, predicting growth of 5.2% in 2024.

Last year was also the first year since 2012 when the government booked a primary surplus, Sri Mulyani said, referring to the fiscal balance excluding net interest payments on public debt.

For 2024, the government plans to use 51.38 trillion rupiah of its accumulated cash to cover the budget deficit and reduce debt issuance, said Suminto Sastrosuwito, the ministry’s head of budget financing, adding the figure would evaluated based on needs.

($1 = 15,465.0000 rupiah)

(Reporting by Stefanno Sulaiman, Gayatri Suroyo and Fransiska Nangoy; Editing by Kanupriya Kapoor and Bernadette Baum)