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Indonesia 2010 Budget Deficit Likely 1.1% of GDP

Indonesia’s 2010 budget deficit will probably come in at 1.1 percent of gross domestic product, less than the government’s midyear estimate of 1.5 percent and 2011’s target of 1.8 percent, Finance Minister Agus Martowardojo said.

“In the long run we expect our budget to be balanced,” Martowardojo said at a year-end press briefing at the Finance Ministry in Jakarta today. “If the situation is still like today, where next year world economic growth is expected to be lower than this year, we still want to provide stimulus. We will always maintain our deficit to be below 2 percent.”

Economists including New York University’s Nouriel Roubini, who is credited with predicting the financial crisis, have said global growth may slow in 2011 compared with this year. Emerging market economies are grappling with capital inflows that have pushed up currencies, making the region’s exports more expensive.

Indonesia’s inflation this year will be about 6.5 percent, faster than its target of 4 percent to six percent, partly due to volatile food prices, Martowardojo said. Next year’s inflation target is about 5.3 percent, he said.

Bank Indonesia on June 16 set a one-month minimum holding period for those investing in its bills and said it would start selling nine- and 12-month paper to encourage funds to keep their money in the nation for longer periods.

Five state-owned financial institutions, including PT Bank Mandiri, have given their commitment to buy back bonds to ease the impact of sudden capital outflows during a crisis, Agus Suprijanto, acting head of fiscal policy at the Finance Ministry, said after today’s press briefing. The government is still in talks over the use of their funds and will prioritize funding from the state budget for any buybacks, he added.

The four other institutions are PT Bank Rakyat Indonesia, PT Bank Negara Indonesia, state pension fund PT Taspen and Lembaga Penjamin Simpanan, which guarantees deposits at banks in Indonesia, he said.

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