A brief look at 2023 fiscal policy and budget posture
Key Takeaways
• 2023 policy agenda : fiscal consolidation with revenue is set to grow marginally +0.3% YoY while expenditure is cut -4.0% YoY to bring budget balance at -2.85% GDP.
• Expecting a moderation of commodity prices as global economic slowdown materialize on the back of : 1) geopolitical tensions & 2) aggressive monetary tightening to also affect revenue & expenditure sides.
• Bringing inflation rate at 3.3% and IDR at 14,750/USD need a strong and more coordinated fiscal-monetary policy through rate hikes and ensuring adequacy of domestic supply to reduce uncertainties as well as volatilities.
• Albeit the lower budget deficit outlook, challenges for financing include : 1) offering a more attractive yield; 2) further global CB’s hawkish stance that could result to capital outflows; and 3) no more BI support.
• With budget deficit pegged at -2.85% GDP and mid CAD at -1.8% GDP, money will keep flowing to private sectors. However with the risks skewed to the downsides and possibility of lower surplus, promoting the desirable growth could be challenging.
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