Indonesia Posts USD 1.9 Billion Budget Deficit Amid Falling Tax Revenue 

Indonesia’s state budget (APBN) recorded a deficit of IDR 31.2 trillion (USD 1.9 billion) as of Feb. 28, 2025, or 0.13 percent of the nation’s gross domestic product (GDP), the Finance Ministry reported Thursday. The deficit was attributed to state revenue of IDR 316.9 trillion and government spending of IDR 348.1 trillion. 

Finance Minister Sri Mulyani Indrawati stated that the 2025 budget deficit remains within target, as the government has set an annual deficit of IDR 616.2 trillion, or 2.53 percent of GDP. “This is still well within the planned APBN framework,” she said at a press conference. 

Indonesia’s state revenue saw a year-on-year decline of 20.85 percent from IDR 400.36 trillion in February 2024. Tax revenue dropped by 25 percent to IDR 240.4 trillion, with income tax collection shrinking by 30.19 percent to IDR 187.8 trillion. The customs and excise revenue, however, slightly increased by 2.13 percent to IDR 52.6 trillion. 

Deputy Finance Minister Anggito Abimanyu attributed the decline to seasonal fluctuations, explaining that tax revenue tends to rise at year-end due to holiday spending but dips in the early months of the year. “This pattern is normal,” he said. 

The drop in tax revenue was also linked to lower global commodity prices, with coal falling 11.8 percent, oil down 5.2 percent, and nickel declining 5.9 percent. Additionally, changes in income tax regulations required the government to refund IDR 16.5 trillion in overpaid payroll taxes from the previous year. 

Government Spending and Subsidies 

Government expenditure reached IDR 348.1 trillion, with IDR 211.5 trillion allocated for central government spending and IDR 136.6 trillion transferred to regional governments. Spending on subsidies and compensation amounted to IDR 10.7 trillion, including IDR 10.6 trillion for energy subsidies. 

The government also allocated IDR 13.6 trillion for electricity discounts, benefiting 71.1 million customers in January and 64.8 million in February. The discount policy, designed to ease inflationary pressure, contributed to a decline in administered price inflation by 7.38 percent in January and 2.65 percent in February. Additionally, IDR 710.5 billion was spent on providing free meals to millions of Indonesian students as of March 12. 

Despite the fiscal challenges, the government had financed 35.7 percent of the 2025 budget deficit by February. "This indicates a front-loading approach to budget financing," Sri Mulyani said. 

The Finance Ministry remains confident that fiscal policies will stay on track, ensuring economic stability while managing external pressures, including commodity price volatility. 

Source: The Jakarta Globe 

Consumer Confidence Again Declines in February  

Indonesian consumers have shown less optimism in the first two months of 2025 as they become increasingly concerned about employment prospects alongside a general tail off in expectations. 

The consumer confidence index (CCI) dipped to 126.4 points in February from 127.2 points registered in the preceding month, according to a monthly survey released by Bank Indonesia (BI) on Tuesday.  

This extended a decline seen in January CCI data that already dropped from 127.7 points observed in December 2024.  

However, February’s figure was still higher than the 123.1 points logged in the same month of last year, during which the country held the general election, a time that usually coincides with higher uncertainty and subdued confidence.  

In a press statement published together with the survey, BI spokesperson Ramdan Denny Prakoso deemed that the position had remained “strong”. 

Consumers’ expectations for the economy over the upcoming six months show a decline, according to the report. This is despite their perception that the current economic condition has improved.  

The gauges of current income, job availability and durable goods purchases, which taken together represent the current economic condition subindex, were generally moving in sync, showing improvement in the fourth quarter of last year.  

However, in the first two months of this year, the current income subindex stagnated and the job availability subindex declined, but durable goods purchases still improved in the same period.  

The Indonesian Automotive Industry Association (Gaikindo) revealed on Tuesday that car sales in February grew by 2.2 percent year-on-year, Reuters reported. That was the first growth recorded in the industry since June 2023, though it was largely due to electric vehicles sales, which benefitted from the government’s tax exemption.  

The sales of cars, which are part of durable goods, have been facing challenges due to Indonesia’s weak spending power. The association said customers tended to hold off on purchasing cars last year due to the election.  

The gauges that make up the consumer expectation subindex, namely income expectation, job availability expectation and business activity expectation, all declined in February.  

The income expectation gauge dropped by 1.5 points, the business activity gauge dropped by more than 2 points and the job availability expectation gauge nosedived by almost 3 points.  

Job availability expectations saw a steep drop of more than 9 points for the age group of 20 to 30 years. Data from Statistics Indonesia (BPS) released in January showed that the group represented the largest number of unemployed workers compared to other age groups. 

However, all the gauges and subindices of the CCI were still staying well above the 100-point line that separates consumers’ optimism from pessimism.  

The share of consumers’ income that went to consumption went up in February to 74.7 percent from 73.6 percent in the previous month.  

Meanwhile, shares of income held as savings declined to 14.7 percent from 15.3 percent within the same period.  

The chunk that went to pay off monthly installments dipped to 10.6 percent from the previous 11.1 percent, also in the same period. 

Source: The Jakarta Post 

Indonesia Proposes Raising Royalties Paid by Mining Companies 

Indonesia is considering raising royalties paid by mining companies from commodities like coal, nickel and copper, among others, its mining ministry said. 

The proposal came as Indonesia's new government is planning major changes in its budget to accommodate President Prabowo Subianto's big spending plans, including a free school lunch program. 

It aims to improve governance of the sector, ministry official Tri Winarno said, according to a YouTube recording of a public consultation on Saturday about the proposed changes. 

Mining is a major source of revenue for resource rich Indonesia. The country is the world's biggest exporter of thermal coal and nickel products, as well as a major source of tin and copper for the global market. 

Officials proposed raising royalty rates paid by miners and producers of metal products based on price levels, including introducing progressive rates for metals like nickel and copper, officials at the public consultation said. 

The government proposed levying royalties ranging between 14% and 19% for nickel ore, depending on benchmark price levels, compared with the current 10% flat rate, according to the ministry's public consultation document. 

The document also contained proposals for progressive rates for nickel matte and ferronickel. 

For coal, the government would raise royalty rates by one percentage point to up to 13.5%, but only when the benchmark coal price hit at least USD 90 per metric ton. 

The government already charges progressive royalty levies for coal, with the lowest rate at 8% for coal with a calorific value of maximum 4,200 kilocalories per kilogram when prices are at least USD 90 per ton. 

The proposal suggested hiking the royalty rate for copper ore to between 10% and 17%, from a flat 5% now, with increases also considered for copper concentrate and copper cathode. 

The proposal also included royalty increases for tin, gold, silver and platinum. 

Source: Reuters