Indonesia govt allocates IDR150 trillion for economic recovery programmes

The Indonesia government will be increasing its total state spending to up to IDR405.1 trillion (US$24.2 billion), in a bid to combat the COVID-19 situation. According to a speech by president Joko Widodo, out of the IDR405.1 trillion, IDR150 trillion will be allocated for economic recovery programmes, which includes credit restructuring and financing for small and medium businesses. Approximately IDR70.1 trillion will be used for tax incentives and credit for enterprises, IDR75 trillion for healthcare spending, and IDR110 trillion for social protection.

This stimulus package comes after its initial one in February, where the Indonesia government was reportedly handing out IDR10.3 trillion (SG$1 billion) to aid businesses and consumers to counter the economic impact due to the COVID-19 outbreak.

Under the new stimulus package, corporate income tax for the manufacturing sector will be reduced from 25% to 22%, while import tax payments will also be deferred in 19 manufacturing sectors. Workers in the sector who earn below IDR200 million per year will be exempted from employee income taxes. Healthcare workers will also be prioritised, with the allocated 75 trillion rupiah being used to purchase medical equipment and protective gears. Part of the money will be used to provide incentives for medical workers as well.

With the new stimulus package, the government anticipates the country's budget deficit to reach 5.07%, which exceeds the current state budget deficit policy of 3% of the country's GDP. Therefore, it will be relaxing the deficit policy to allow a budget deficit of more than 3% for the next three years. The government will return to imposing a fiscal discipline of below 3% deficit starting in 2023.

At the time of writing, Indonesia has 1,677 confirmed cases of COVID-19 and 157 deaths, according to the World Health Organisation.

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