Senior Economist Predict Minor Crisis caused by Govt Spending

TEMPO.CO, Jakarta - Senior Economist Faisal Basri predicts that Indonesia will be struck by a minor financial crisis in December if the Government does not slash its spending on infrastructure.

“Pak Jokowi talks about not reducing its spending on infrastructure. [It would lead to a minor financial crisis],“ said Faisal on Wednesday, October 11.

Faisal claims a minor financial crisis would cause the weakening of Rupiah exchange rate to a predicted level of Rp14,000 per US Dollar, followed by a drop in economic growth to the level of 4.9 percent. His prediction is based on the fact that government spending on infrastructure is not backed by the growth of tax revenues.

According to his data, Indonesia’s tax revenue in 2016 dropped 3.5 percent compared to the previous year, even though that number has been backed by the tax amnesty program. Without the tax amnesty, tax revenue would have reached a minus 4.8 percent.

Meanwhile, tax revenue up until September of 2017 dropped 2.7 percent.

Faisal said that if the state spending is not reduced, the Government will automatically increase its tax revenue. “Now the effect will be felt by the public, which will always be bothered by tax officers. I personally have received two ‘love’ letters from the tax office,” said Faisal Basri.

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