2021 State Budget Focuses on Acceleration of Economic Recovery

BPMI SEKRETARIAT PRESIDEN

President Joko Widodo wears traditional Sabu clothing from East Nusa Tenggara at the People’s Consultative Assembly (MPR) Annual Session and Joint Session of the House of Representatives (DPR) and Regional Representatives Council (DPD) at the Nusantara building of the legislative complex, Jakarta, Friday (14/8/2020).

The government’s fiscal policy in 2021 is focused on measures to accelerate economic recovery. The effectiveness of the handling of the Covid-19 pandemic will become a determining factor.

JAKARTA, KOMPAS— In addition to accelerating the country’s economic recovery, the 2021 State Budget will also be focused on structural reform to improve productivity, innovation and economic competitiveness, accelerate digital transformation and anticipate demographic changes. The government projects the economy will grow at between 4.5 percent and 5.5 percent next year.

In his speech when submitting the 2021 Draft State Budget and Financial Notes during a plenary session of the House of Representatives (DPR) in Jakarta on Friday, President Joko “Jokowi” Widodo said that the economic recovery program would be continued next year with a number of reform measures in various fields.

Also read: Fundamental Transformation

Earlier in the day in his speech when delivering performance reports of state institutions in celebrating the 75th Indonesian Independence Day, the President said all countries were going through difficult times due to Covid-19. However, the pandemic is also an opportunity to make a fundamental change and to carry out a major transformation and introduce a big strategy. "It\'s time for us to use the momentum of the crisis to make a big leap," said the President.

Acceleration

The government allocates about Rp 356.5 trillion (US$24.16 billion) to finance national economic recovery in the 2021 Draft State Budget. Of the total, Rp 25.4 trillion are allocated for health sector, Rp 110.2 trillion for social protection, Rp 136.7 trillion for ministries/government institutions and local governments, Rp 48.8 trillion for micro, small and medium enterprise (MSMEs), Rp 14.9 trillion for corporate financing and the other Rp 20.4 trillion for business incentives.

Previously, the health budget accounted for about 5 percent of the total expenditures.

The acceleration of the economic recovery program will be carried out through reform measures in the fields of education, health, social protection, as well as the budgeting and taxation system. The government increases to the total health budget to Rp 169.7 trillion or the equivalent of 6.2 percent of the total expenditures. Previously, the health budget accounted for about 5 percent of the total expenditures.

The 2021 budget for education is set Rp 549.5 trillion and mostly directed for an improvement in the quality of human resources, technological adaptability and productivity.

The government also allocates Rp 30.5 trillion to accelerate digital transformation in the realm of government administration and public services. In addition, the government also plans to spend Rp. 414 trillion for infrastructure development which will be, among others, used to provide basic services and improve connectivity, including internet access.

The President said that the Covid-19 pandemic showed that the availability of digital infrastructure is very important and strategic. Therefore, infrastructure spending is directed at strengthening digital infrastructure and encouraging logistical efficiency and inter-island connectivity.

The acceleration of the economic recovery will be carried out by promoting the tourism industry. The government allocates Rp 14.41 trillion for the development of priority tourist destinations such as Lake Toba, Borobudur, Mandalika, Labuan Bajo and Likupang.

ANTARA/GALIH PRADIPTA

President Joko Widodo, accompanied by Vice President Ma\'ruf Amin, enters the People’s Consultative Assembly (MPR) Annual Session room and the Joint Session of the House of Representatives (DPR) and Regional Representatives Council (DPD), Friday (14/6/2020). The President delivered a state speech ahead of the commemoration of the 75th Independence Day of the Republic of Indonesia.

The 2021 Draft State Budget, the government’s main instrument to achieve development targets, sets state revenues of Rp 1.77 quadrillion and state expenditures of Rp 2.74 quadrillion. Thus, the budget deficit is estimated to reach Rp 971.2 trillion or 5.5 percent of GDP.

Finance Minister Sri Mulyani Indrawati said that the economic recovery would rely much on the effectiveness in the handling of Covid-19, the use of health protocols outside the home, and availability of vaccines.

Too optimistic

The executive director of the Institute for Development of Economics and Finance (Indef), Tauhid Ahmad, said the government\'s development targets and economic recovery goals were too optimistic.

The government may face a difficulty in achieving the growth target of between 4.5 percent and 5.5 percent in 2021 considering that this year\'s weak performance low. The economy is projected to suffer a contraction of between 1.1 percent and 0.2 percent this year.

BPMI SEKRETARIAT PRESIDEN

President Joko Widodo, accompanied by Vice President Ma\'ruf Amin, enters the People’s Consultative Assembly (MPR) Annual Session room and the Joint Session of the House of Representatives (DPR) and Regional Representatives Council (DPD), Friday (14/6/2020). The President delivered a state speech ahead of the commemoration of the 75th Independence Day of the Republic of Indonesia.

The slowdown in economic growth is much influenced by the household consumption. About 60 percent of the household consumption comes from middle and upper class groups who tend to hold back on spending and increase saving if there are no signs of improvement in the handling of the pandemic.

The economic recovery target will be difficult to achieve if the realization of the government spending and state revenue is low. This year\'s state revenue is only projected to reach around 70 percent.

Bank Danamon economist Wisnu Wardhana said the 2021 budget plan seemed to be more balanced. In addition to budget allocations for business stimulus and social assistance, the government also sets aside large funds for productive spending. The condition is different from the 2020 budget, which prioritizes economic resilience. (KRN/ INA/LAS /IDO/NSA)