The state budget deficit will potentially widen in 2022 due to the Russia-Ukraine conflict, Institute for Development of Economics and Finance (Indef) economist Eisha M. Rachbini has predicted.
“Looking ahead, if oil price persistently hovers at a high level of above US$100 per barrel and essential commodity prices increase, the government will likely conduct price intervention, provide subsidies and social assistance, which will eventually put pressure on the state budget deficit,” he said in a press statement released in Jakarta on Tuesday.
Each US$1 per barrel rise in the Indonesian crude price (ICP) will raise the liquefied petroleum gas (LPG) subsidy by Rp1.47 trillion, kerosene subsidy by Rp49 billion, compensation to state oil and gas firm Pertamina by Rp2.65 trillion, and electricity subsidy by Rp295 billion, he projected.
In the meantime, state revenues from tax receipts and non-tax state revenues will increase by Rp0.8 trillion and Rp2.2 trillion, respectively, so the budget deficit could potentially widen, Rachbini said.
The government is expecting the 2022 state budget deficit to reach Rp868 trillion or 4.8 percent of the national gross domestic product (GDP), he noted.
“The state budget needs to be managed accurately and efficiently by prioritizing economic recovery, maintaining the people’s purchasing power and economic growth,” he said.
The government also needs to increase subsidies to maintain the purchasing power of the community, particularly low- and middle-income people, to prevent them from falling into deeper poverty, he said.
“The future risk is that inflation threat may lower the purchasing power of the community and may have the risk of impeding economic growth,” he added.
Source: Antara News