Need policy to relax deficit ceiling of 3% of GDP: Jokowi

Need policy to relax deficit ceiling of 3% of GDP: Jokowi

President Joko Widodo delivers a speech on the performance of state institutions at the MPR annual session and the DPR-DPD joint session at the parliament building on Friday. (ANTARA FOTO/Akbar Nugroho Gumay/pras)

The expansion of the budget deficit is being done since state spending on the handling of health and economic problems has increased, while, at the same time, state revenues have declined.
Jakarta (ANTARA) - President Joko Widodo has said the government still needs to draft a policy to relax the state budget deficit ceiling of 3 percent of the gross domestic product (GDP) in wake of the coronavirus pandemic.


The policy is still needed, but it must be implemented by observing the principles of prudence, credibility, and fiscal sustainability, he said, while presenting the bill on the 2021 state budget and financial notes at the plenary meeting of the House of Representatives (DPR) at the Parliament building in Jakarta on Friday.


“The expansion of the budget deficit is being done since state spending on the handling of health and economic problems has increased, while, at the same time, state revenues have declined,” he explained.

The head of state pointed out that the government has taken a lot of extraordinary steps to address the problems.

Law No. 2/2020 allows the government to relax the budget deficit by more than 3 percent of the GDP in three years' time, he said.

“The 2020 state budget had been revised by setting a budget deficit of 5.07 percent of the GDP, and it was later raised to 6.34 percent of the GDP,” he elaborated.

The COVID-19 pandemic has become a health and humanity disaster in this century which has had an impact on all aspects of life, he said.

The pandemic has affected not only the health sector, but also the social, economic, and financial sectors, Jokowi noted.

“Many countries have taken extraordinary measures (to handle the problems), particularly through fiscal stimulus,” he said.

Citing an example, he said, Germany had allocated 24.8 percent of its GDP for fiscal stimulus. However, the German economy contracted 11.7 percent in the second quarter of 2020.

The same has also been true for the United States, which allocated 13.6 percent of the GDP, but saw its economic growth contract by 9.5 percent.

"China allocated 6.2 percent of the GDP for fiscal stimulus. Their economy grew positively by 3.2 percent in the second quarter after contracting 6.8 percent in the previous quarter," Jokowi remarked. (INE)


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