JAKARTA – World Bank predicted Indonesian budget deficit could be wider compared to the previous year despite the Indonesian economic growth of 6.1 percent. The projection of Indonesia economic growth this year reached 6.1 percent, even World Bank was sure that it would become 6.4 percent in 2013.

Indonesian economic growth is assessed faster that its neighbors. Rating agencies, such as Fitch and Moody’s, increase the rank of Indonesian credit to investment grade. The economic growth in the last quarter of 2011 was in 6.5 percent.

World Bank’s lead economist for Indonesia, Shubham Chaudhuri, said the world economic growth was slowing down on the last three months, except for the US. Yet, Chaudhuri added the Indonesian budget deficit would be wider than last year. The estimated deficit reached 2.2 percent from gross domestic income, while last year was only 1.2 percent. But, the index of consumer growth was higher than previous year, which is in 8.5 percent from 4.1.

Due to the additional subsidies on energy and infrastructure expenditure, the deficit in revised state budget 2012 is 2.2 percent. If the average of world oil price reaches 120 USD per barrel in a year, the deficit of revised state budget would increase 3.1 percent from gross domestic income –even without the increasing of subsidized fuel price- or 2.5 percent if subsidized fuel increases on the third quarter of 2012. 

Government repelled World Bank’s statement. The Coordinating Minister of Economy, Hatta Rajasa, said government should maintain the fiscal policy despite the negative threat due to the suspension on subsidized fuel price hike. “World Bank should know that 3.1 percent deficit is breaching the law. We will maintain the fiscal so that it will not be more than three percent,” Rajasa said on Wednesday.

He believed Indonesian economic growth could surpass World Bank’s prediction. “We also made a correction from 6.7 percent to 6.5 percent,” he said.

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