2021 State Budget Should Accelerate Economic Recovery: Jokowi

President Joko “Jokowi” Widodo, in a limited Cabinet meeting on the draft of the 2021 state budget, said it must focus on the recovery of the nation’s economy.

BIRO PERS SEKRETARIAT PRESIDEN

President Joko “Jokowi” Widodo attends a virtual limited Cabinet meeting at the Merdeka Palace in Jakarta on Monday (27/7/2020).

JAKARTA, KOMPAS — The 2021 state budget is expected focus on accelerating the recovery of the nation’s economy, and next year’s deficit is expected to remain wide to accommodate increased government spending.

President Joko “Jokowi” Widodo, in a limited Cabinet meeting on the draft of the 2021 state budget at the Presidential Palace in Bogor, West Java, on Tuesday (28/7/2020), said it must focus on the recovery of the nation’s economy. The budget also aims to strengthen reforms in the fields of health, food, energy, education and digital services.

Joining the meeting digitally were Vice President Ma\'ruf Amin and a number of ministers.

The state budget, the President said, only constituted about 14.5 percent of the nation’s gross domestic product (GDP), but in a crisis, government spending had to be the main lever of the domestic economy so that the private sector could recover.

On July 1, Indonesia was officially reclassified from a middle-low income country to a middle-high income country.

The President said the government must not forget the nation\'s overarching strategic agenda during the crisis, especially the country’s efforts to avoid the middle-income trap. On July 1, Indonesia was officially reclassified from a middle-low income country to a middle-high income country.

"However, we know that getting out of the middle income trap is still a large and long [task]," said the President.

ANTARA/AKBAR NUGROHO

President Joko “Jokowi” Widodo (fifth right) presides over a limited Cabinet meeting on the COVID-19 pandemic at the Merdeka Palace in Jakarta on Monday (29/6/2020).

The global economy, Jokowi said, was developing very dynamically but was still full of uncertainty. Several global financial institutions were continuing to revise 2020 and 2010 global growth predictions. "That is, it is still full of uncertainty," he said.

The International Monetary Fund (IMF) expects the global economy to grow 5.4 percent in 2021, while the World Bank expects 4.2 percent growth and the Organization for Economic Cooperation and Development (OECD) expects between 2.8 and 5.2 percent growth.

"I think if this estimate is correct, we will be in an economic position that should be above global economic growth. Indonesia is also expected to enter the group of countries with the fastest economic recovery after China. If this projection is correct, we should be grateful," said the President.

However, Jokowi underscored the potential for a second wave of COVID-19 amid the uncertainty of the global economy in 2021, saying vigilance and anticipation had to continue.

The agreed-upon assumptions will be used as a reference for the preparation of the 2021 financial note and the draft state budget.

"The macroeconomic indicator figures must be carefully and attentively calculated. We must be optimistic but also realistic by considering the latest conditions and projections," said the President.

Finance Minister Sri Mulyani Indrawati and House of Representatives Commission XI agreed on the Macroeconomic Framework and Fiscal Policy Principles (KEM PPKF) at a working meeting on Monday (22/6). The agreed-upon assumptions will be used as a reference for the preparation of the 2021 financial note and the draft state budget.

Kompas/TOTOK WIJAYANTO

Construction activities for light rail stations or LRT Jakarta, Bogor, Depok, Bekasi (Jabodebek) on the Dukuh Atas-Cawang route are reflected from the glass building in the Rasuna Said Street area, Jakarta, Monday (2/7/2020). Until the beginning of July 2020, project construction reached 72.51 percent or an increase of 1 percent from the previous month.

The basic macroeconomic assumptions for 2021 include economic growth of 4.5 to 5.5 percent, inflation of 2 to 4 percent, a rupiah-United States dollar exchange rate of Rp 13,700 to Rp 14,900 to the dollar and a 10-year government security interest rate between 6.29 and 8.29 percent.

The development targets include an unemployment rate of 7.7 to 9.1 percent, a poverty rate of 9.2 to 9.7 percent, a Gini coefficient of 0.377 to 0.337 and a human development index of 72.78 to 72.95.

Quoting an article on the Finance Ministry website, Sri Mulyani explained that if there was no second wave of COVID-19, the central bank would have the opportunity to reduce bond purchases. Thus, economic activities could become more normal.

"In 2021, we hope the [situation] will be somewhat normal or, in this case, the ability to adapt to the so-called new normal will lead to greater productive activity without sacrificing the health side," Sri Mulyani said.

Kompas/Heru Sri Kumoro

Minister of Finance Sri Mulyani conveyed the Macroeconomic Framework and the Main Fiscal Policy RAPBN 2021 in the DPR plenary meeting held at the Parliament Building Complex, Senayan, Jakarta, Tuesday (12/5/2020). The plenary meeting was also held online which was attended by a number of DPR members virtually.