Sri Mulyani: Strengthen State Budget Stimulus, Maintain Recovery Sentiment, Encourage Economic Growth
Jakarta, August 25, 2021 – The Delta variant remains a big challenge in the development of the global pandemic. As of August 23, 2021, the total global Covid-19 cases reached 213.3 million, while the total number of deaths reached 4.4 million. Before the Delta variant spread, the trend of Covid-19 cases in Indonesia was relatively low compared to other countries with large populations. Entering August 2021, Indonesia’s daily cases and death rates have decreased in line with the implementation of PPKM, especially in Java-Bali. However, vigilance must continue to be maintained and pandemic control will continue to be improved, including the implementation of disciplined health protocols 3T (testing, tracing, and treatment) and 5M (wearing masks, washing hands, maintaining distance, avoiding crowds, and reducing mobility) as well as accelerating vaccinations to achieve the target of 208 million people by the end of 2021.
The global economic recovery continues as optimism remains high, as indicated by the rebound in economic growth in the second quarter of 2021 in various G 20 countries and ASEAN. In addition, the global Manufacturing PMI which grew solidly at 55.4 was supported by the strong performance of the US and Europe, increased trading activity in line with the expansion of re-opening, especially in developed countries, as well as rising commodity prices, including Indonesia’s leading commodities such as coal, nickel and CPO as well contributed to strengthen the global economic recovery. Nevertheless, several risk factors still need to be watched out for, including: rising global inflation, potential for tapering, vaccination and uneven recovery, as well as the development of new variants.
Domestic economic growth until the second quarter of 2021 shows a positive signal. The economic contraction that occurred in Indonesia in 2020 was not as deep as that experienced by other countries. In addition, the rebound in the second quarter of 2021 managed to bring Indonesia’s real GDP back to the pre-pandemic level, while the real GDP of other countries, especially in ASEAN, was still below the pre-pandemic level. The government is committed to continuing anticipatory and responsive steps to the existing dynamics. The role of fiscal stimulus and the state budget continues to be increased as an effort to recover the economy during the pandemic in line with the active role of the community in implementing health protocols and participating in vaccination programs to achieve the herd immunity target by the end of 2021.
The Minister of Finance said in a virtual press conference of the August 2021 edition of the KITA State Budget “Indonesia, because our decline was relatively mild for the whole year, even though the second quarter of 2020 had a minus 5.3 contraction, we could then begin to gradually recover and in the second quarter of 2021 we would be reborn at 7.1%, Indonesia’s Gross Domestic Product (GDP) has passed the pre-covid level, from 2.735 trillion to 2.773 trillion in the second quarter compared to 2019.
The Trend of Domestic Economic Recovery Repressed in the Early Quarter III-2021 Due to the emergence of the Delta Variant
Public mobility was briefly restrained to a negative level of 17.7 in mid-July, but then rose consistently again until the beginning of the third week of August in line with the controlled Covid-19 cases. Meanwhile, the decline in the level of public confidence was relatively maintained during the spread of the Delta variant and was better than the initial period of the pandemic. On the other hand, electricity consumption has consistently grown positively over the past four months, supported by industrial electricity growth in line with electricity subsidies provided by the Government. This also indicates that the industrial sector can still operate during the PPKM period. Furthermore, the Trade Balance in July showed a surplus of USD 2.59 billion or an accumulation of USD 14.42 billion from January 2021 supported by export-import growth. Export performance grew by 29.32 percent (yoy), contributed by exports of coal, palm oil, iron and basic steel, and natural gas. Export growth was mainly driven by the increase in global commodity prices. Meanwhile, import performance grew by 44.44 percent (yoy), driven by positive growth in imports of raw materials and capital goods. This indicates that production activities can still run with the adaptation of strict health protocols in the middle of PPKM Level 4.
“The PPKM did decrease all mobility, but in August everything reversed. Retail and recreation have started to increase, grocery and pharmacy have started to rebound again, and in aggregate they are rebounding. This is an important key, namely how we can continue to control Covid and still be able to carry out economic activities.” said the Minister of Finance.
APBN 2021 Continuing Good Performance
The role of the fiscal stimulus and the state budget continues to be enhanced as an effort to recover the economy during the pandemic. The hard work of the state budget through state spending is supported by the performance of programs to handle Covid-19 and economic recovery. As of July 2021, state spending has reached Rp1,368.4 trillion or grew 9.3 percent, consisting of Central Government spending of Rp952.8 trillion and Transfers to Regions and Villages (TKDD) of Rp415.5 trillion.
The realization of K/L goods spending grew significantly by 78.7 percent (yoy) influenced by the acceleration of the 2021 PEN program as well as strict restrictions on activities at the beginning of the 2020 pandemic. K/L goods expenditures were used to procure 65.79 million doses of vaccines, provide assistance to 10.5 million Micro Businesses, treatment costs for 377.7 thousand Covid 19 patients, and BOS assistance to 4.15 million Ministry of Religion school students. Capital expenditure realization also grew significantly by 83.3 percent (yoy), influenced by payments and acceleration of basic infrastructure/advanced connectivity projects in 2020, including for the construction and preservation of dams, irrigation networks, railway lines, roads, bridges, and hospitals. Furthermore, the realization of the budget for social protection grew by 10.1 percent (yoy), utilized for the distribution of various social assistance, subsidies, and other government assistance as a cushion for poor and vulnerable families affected by the Covid-19 pandemic. The benefits that have been provided to the public through the social protection budget include the distribution of basic food cards to 15.9 million KPM, assistance for the family of hope program for 9.9 million KPM, the distribution of Cash Social Assistance to 10 million KPM, pre-employment program to 2.8 million participants, JKN contribution assistance to 96.5 million PBI, electricity discount to 32.6 million customers, distribution of Village BLT to 5.3 million KPM, and internet quota assistance to 34.4 million students and educators. In addition, the realization of the health budget grew 50.7 percent (yoy), mainly used for handling Covid-19 such as the provision of vaccines, medicines, patient care, and health workers incentives. Realization of subsidies, both energy and non-energy subsidies, grew higher than last year, reaching 24.0 percent (yoy) and 8.8 percent (yoy), among others, used for subsidies for fuel, 3 kg LPG cylinders, electricity, interest subsidies KUR and IJP.
Meanwhile, the realization of TKDD disbursement as of July 31, 2021 reached Rp.415.53 trillion or 52.2 percent of the 2021 APBN target. The role of Regional Governments is very important in encouraging the realization of TKDD, one of which is by accelerating the fulfillment of distribution requirements for Non-Physical DAK (DAKNF). In addition, the government provides three additional types of new transfers for the DAKNF component, including: investment facilitation funds, food and agricultural security funds, and women and child protection services funds.
Significantly Accelerated PEN Program in Social Protection and Health Cluster
The PEN program is the main instrument used by the Government in the context of handling health and economic recovery as a result of the pandemic, both in 2020 and 2021. The total budget allocation for the PEN Program in the 2021 APBN is IDR 699.43 trillion, an increase compared to 2020, which was IDR 695.2 trillion. In its development, the PEN Program for 2021 was again increased to Rp744.77 trillion, especially to provide additional support for health care and social protection amidst the increase in Covid-19 cases due to the transmission of the Delta variant.
The realization of the PEN program until August 20, 2021 reached Rp326.16 trillion or 43.8 percent of the ceiling. Realization in the health sector reached Rp77.18 trillion, which was used for the use of the Pondok Gede Hajj Dormitory Emergency Hospital, distribution of drug packages to the community, treatment costs for 426.94 thousand patients, providing incentives for 861.9 thousand health workers, and death compensation for 278 health workers, procurement of 81.42 million doses of vaccine, as well as assistance for JKN contributions for 19.15 million people. Furthermore, in the social protection sector, Rp 99.33 trillion was realized, especially for the provision of PKH assistance, BST, pre-employment cards, internet quota assistance, electricity subsidies, wage subsidies, and rice assistance. Meanwhile, in priority programs, Rp50.25 trillion was realized for the Ministry/Agency Intensive Work Program, Tourism, Food Security and Regional Loan Facilities.
In addition, the government also supports the business world through the support of MSMEs and corporations, as well as providing various business incentives. MSME and corporate support has been realized in the amount of Rp. 48.02 trillion, especially for the provision of assistance to micro business actors (BPUM) of 11.84 million businesses, IJP MSMEs and corporations, placement of funds in banks, as well as interest subsidies for KUR and non-KUR. Meanwhile, the provision of business incentives has been realized in the amount of Rp. 51.97 trillion for PPh 21 DTP incentives, Final PPh MSMEs DTP, Exemption of PPh 22 Imports, Reduction of PPh 25 installments, pre-refund of VAT, reduction of corporate income tax rates, PPN DTP Property, and PPnBM Cars.
State Revenue is Increasingly Optimal, Indicating Continuing Economic Recovery
Improved spending and investment performance for handling the Covid-19 pandemic and economic recovery accompanied by more optimal Tax and Non-Tax Revenues and financing support. Until July 2021, realized state revenues amounted to Rp1,031.5 trillion or grew by 11.8 percent, experiencing improvements both in terms of Taxation, Customs and Excise and PNBP. Tax revenue reached Rp 647.7 trillion, grew 7.6 percent (yoy). Net revenues for the majority of taxes continued to improve, indicating that economic activity was starting to grow. Likewise, if viewed by sector, the net income of the majority of the main sectors, which is improving indicates the continued recovery of the domestic economy. The use of tax incentives will continue in 2021, until mid-August reaching Rp51.97 trillion, consisting of business incentives (PMK-9) of Rp50.24 trillion, PMK-21 incentives (VAT DTP for houses) of Rp304.6 billion, and incentives PMK-31 (PPnBM DTP Motor Vehicles) amounting to Rp1.43 trillion.
The realization of customs and excise also grew significantly, by 29.5 percent (yoy), reaching Rp 141.21 trillion, driven by the performance of all revenue components. Excise performance grew by 18.2 percent (yoy) driven by the growth of Tobacco Excise (CHT) and the effectiveness of policies and supervision in the excise sector. Performance of Import Duty grew 9.2 percent (yoy) influenced by the trend of performance of national imports which continued to increase, especially in the manufacturing and trading sectors, while the performance of Export Duty grew by 888.7 percent (yoy) driven by increased exports of copper commodities and high prices of Palm oil. In addition, the Government also provides customs and excise incentives, especially in the health sector, for the import of medical devices and vaccines.
Furthermore, PNBP performance until July 2021 reached Rp242.1 trillion, growing 15.8 percent (yoy). PNBP performance is getting better supported by increased revenues from oil and gas and non-oil and gas natural resources, other PNBP, and BLU revenues, which grew 8.1 percent, 62.9 percent, 31.2 percent and 97.4 percent (yoy).
State Budget Financing Supports Economic Recovery
The state budget deficit is still maintained, as of July 31, 2021 it will reach IDR 336.9 trillion or 2.04 percent of GDP. Meanwhile, the realization of budget financing reached Rp447.8 trillion or 44.5 percent of the APBN target.
The need for debt financing through the issuance of SBN decreased as a result of optimizing the use of SAL and decreasing the deficit outlook. The performance of the SBN market continues to improve, as indicated by the downward movement in yield compared to the beginning of 2021. On-track financing is supported by conducive market conditions and solid cooperation with Bank Indonesia. The contribution of Bank Indonesia in purchasing SBN according to SKB I until August 20, 2021 has reached Rp. 136.01 trillion, consisting of SUN SKB I of Rp. 92.82 trillion and SBSN SKB I of Rp. 43.19 trillion. With the implementation of the SKB III between the Government and Bank Indonesia, the target for issuance of SBN in the primary market will be adjusted.
Furthermore, Investment Financing was realized quite well, along with the completion of the administrative process and preparation of regulations. As of August 18, 2021, Rp54.1 trillion has been reached, consisting of: Investments in LMAN of Rp11.1 trillion, Housing Financing Funds (DPP) of Rp11.0 trillion, Revolving Fund Financing of Rp20.0 trillion, Regional Government Loans of Rp10 0.0 trillion, and the International Development Cooperation Fund Financing of Rp. 2.0 trillion.
Entering the third quarter of 2021, the economic recovery will continue, supported by the hard work of the state budget. Efforts to suppress the increase in Covid-19 cases require significant additional costs. However, the Government’s anticipatory and handling measures have shown tangible results with the growth of economic activity and public consumption. The positive trend in State Revenue is expected to continue as the economy improves, so that the hard work of the State Budget in handling Covid-19 and the national economic recovery program is maintained. The quality of state spending also continues to be improved in order to support growth momentum. In addition, the active role of the community is also very much needed in the implementation of 3T and 5M, as well as participation in vaccination programs to reach the herd immunity target at the end of 2021.
For further information, please contact the Directorate General of Financing and Risk Management, Ministry of Finance, Frans Seda Building, Jl. Wahidin Raya No.1 Central Jakarta, Tel: (021) 3865330.
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The Ministry of Finance publishes the August 2021 edition of the APBN Kita (Performance and Facts) publication, which provides more detailed information on the realization of the implementation of the APBN until the end of July 2021 from time to time including the impact on the economy.
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