The Indonesian government’s budget for 2020 came a step closer to being passed this week after the parliament’s budgetary committee approved President Joko Widodo’s spending plans for the coming year. Although spending is set to rise by 8.5% next year, the budget deficit is set to narrow slightly from an estimated 1.9% of GDP this year to 1.8% in 2020. Accordingly, fiscal policy is likely to act as a small drag on the economy. In contrast, fiscal policy across most of the rest of Asia is being loosened. Over the past couple of months a number of countries including Korea, Singapore, India and Thailand have unveiled plans to loosen fiscal policy. Stronger government spending should help to offset some of the drag from weak exports, and is one of the reasons why we think regional economic growth has now bottomed out.
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