Indef Warns Of Turbulent Global Conditions That Have The Potential To Pressure The State Budget

Indef Program Director Esther Sri Astuti (white shirt) at a press conference in Jakarta. (Photo: ANTARA)

JAKARTA - The Institute for Development of Economics and Finance (Indef) warned that the current global condition which is currently volatile has the potential to suppress the State Revenue and Expenditure Budget (APBN).

The turbulent global conditions in question are the COVID-19 pandemic that is still engulfing the world, the geopolitical conflict between Russia and Ukraine, the increase in interest rates by the United States (US) Central Bank, the Fed, and the Zero COVID-19 policy or strict lockdown in China.

"For example, geopolitical conflicts caused an energy crisis to increase world oil prices, as a result the government had to change one of the assumptions of the state budget, namely oil prices," said Indef Program Director Esther Sri Astuti to Antara in Jakarta, Friday.

He explained that the assumption of Indonesia's oil price is adjusted to the increase in global oil prices, as a result, the expenditure of fuel subsidies (BBM) in the State Budget will also increase.

Likewise, the impact of the Fed's interest rate hike will attract investors to invest in Uncle Sam's country, so that the US dollar will strengthen against the rupiah.

As a result, the assumption of the exchange rate in the APBN must also be changed, as well as having an effect on budget expenditures and revenues in the state treasury.

According to Esther, the increase in budget expenditures in the APBN will certainly reduce the government's fiscal space.

"As a result, economic growth will slow down because the government's budget allocated for development is reduced," he said.

With the current global risks, he estimates that economic growth in 2022 will only grow in the range of four percent this year, this figure is below the government's target of 5.2 percent.