2023 State Budget: Obstacles on the path to fiscal consolidation
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - APBN 2023: Gerigi di Jalur Konsolidasi
28 October 2022
By: Tegar Arief & Ni Luh Anggela
The path to fiscal consolidation next year is increasingly tougher, as concerns mount from supply chain disruption, commodity price dynamics, inflation surge, to recession threat in a number of key economies.
Fiscal authorities even envisage that the budget posture next year is at risk of a shift from the direction formulated in the 2023 APBN (State Budget).
Deputy Finance Minister, Suahasil Nazara reveals five obstacles which the government is wary of and trigger the increase of economic uncertainty.
First is the scarring effect on the side of supply which still continues, thus potentially triggers inflation. Second is the global economic slowdown which affects the rate of domestic economic growth.
Third is the war in Ukraine which disrupts supply. Fourth is the aggressive monetary policy tightening which triggers high cost of fund and pushes rupiah down. Fifth is the potential moderation of commodity prices.
“[The risk is] lower income, higher spending. But we assure that State Budget deficit can still be pushed below 3% [against gross domestic product/GDP],” he said, Thursday (27/10).
The obstacle-filled fiscal prospect potentially opens the opportunity for budget posture reformulation this year, as the 2023 State Budget has been agreed upon and will soon be ratified.
In the 2023 State Budget, the target for revenue from taxes which has been the backbone of state revenue is set at Rp1,717.03 trillion, up 15.69% from the Revised 2022 State Budget target provided for in Presidential Regulation No. 98/2022.
Unfortunately, state spending decreases from Rp3,106.43 trillion in the Revised 2022 State Budget to Rp3,061.17 trillion, or is slashed by 1.45%.
This condition is what then makes it difficult for the government to realise fiscal consolidation, one of which is by mandating deficit below 3% against the GDP.
Suahasil added that despite being faced by these obstacles, the State Budget will still serve as the state’s instrument in responding to the dynamics of the economy next year.
The strategy to be implemented is by accelerating key sectors that drive the economy, among others household consumption, export, and investment. “When consumption, export, and investment go up, we will improve the soundness of the State Budget,” he said.
In order to boost investment, the government prepares incentives for business players that carry out downstreaming. This strategy is implemented to boost the flow of investment and add value to the economy.
Responding to the government’s expectation, business players hope that the government will provide them with various incentives that can strengthen their resilience amid economic uncertainty.
Maintained business existence will help spur economic growth faster, so that fiscal soundness can be improved more quickly.
Vice Chairperson of the Indonesian Chamber of Commerce and Industry (Kadin), Shinta Kamdani said that the stimulus awaited by business players is among others the extension of debt restructuring and other supporting instruments to support business improvement. “We hope the restructuring is extended, as it is quite productive for businesses,” she said.
Chairman of the Economic Policy Analysts of the Indonesian Employers Association (Apindo), Ajib Hamdani said that next year, the government is more likely to implement the extensification of tax and excise objects, including starting to apply carbon tax and expand the scope of taxable objects to increase revenue.
