2021 Fiscal Policy Focuses on Speeding up Economic Recovery, Strengthening Reform
Date 14 Agustus 2020
President Joko “Jokowi” Widodo announced that the Government upholds the theme of the 2021 fiscal policy “Speeding up Economic Recovery and Strengthening Reform”.
“The COVID-19 pandemic has become health and humanitarian crises in this century affecting all sectors of human lives. Starting from health issues, the impacts of the COVID-19 pandemic have spread to social, economic and even financial sectors,” President Jokowi said in an Address of the President of the Republic of Indonesia on the Presentation of the Government Statement on the Bill on the State Budget for the 2021 Fiscal Year and Its Financial Note Before the Plenary Session of the House of Representatives of the Republic of Indonesia, Friday (14/8), at the Nusantara Building, Senayan, Jakarta.
According to the President, many countries have rolled out extraordinary mitigation measures, particularly through fiscal stimulus. He cited an example of Germany which has allocated a fiscal stimulus amounting to 24.8 percent of its Gross Domestic Product (GDP); however, its economy has seen a sharp contraction at minus 11.7 percent in the second quarter this year.
“The United States has allocated 13.6 percent of its GDP; however, its economy also declined by minus 9.5 percent. China has allocated a fiscal stimulus at 6.2 percent of its GDP, and its economy has returned to grow by 3.2 percent in the second quarter, but fell by minus 6.8 percent in the previous quarter. Indonesia has also taken extraordinary measures,” he said.
He went on to say that Law Number 2 of 2020 provides relaxation of the State Budget deficit that can be widened above 3 percent for three years. In 2020, the State Budget has been revised with a deficit of 5.07 percent of GDP and then rise again to 6.34 percent of GDP.
“The widening of the deficit is carried out by taking into account the need for state spending to deal with health issues and to rebuild the economy amid the declining state income,” he said.
To date, the Government is still focusing on preparing to face 2021 since global and domestic uncertainties will continue to prevail. National economic recovery will be made along with the reform in various sectors.
“The policy of deficit relaxation that exceeds 3 percent of GDP is still necessary by still maintaining fiscal prudence, credibility, and sustainability,” he said.
For that reason, President Jokowi asserted that the 2021 State Budget Bill is drawn up to:
First, speeding up national economic recovery due to the COVID-19 pandemic;
Second, encouraging structural reform to increase productivity, innovation, and economic competitiveness;
Third, speeding up economic transformation towards digital era, and;
Fourth, capitalizing and anticipating demographic changes.
Considering many uncertainties, the State Budget Bill must be able to anticipate uncertainty in global economic recovery, commodity prices volatility, and development of social and economic orders, and geopolitics, as well as effective national economic recovery, and conditions and stability of financial sector, he added.
“Several fundamental reforms must be undertaken, among others: education reform, health reform, social security reform, and budgeting and taxation systems reform,” he said. (TGH/MAY/EN)
Translated by : Rany Anjany
Reviewed by: Muhardi