Indonesia fiscal deficit to inch up to 1.9% of GDP

This is due to slippage on operating expenses and 'ambitious' revenue aims.

According to Nomura, Indonesia government aims to narrow the fiscal deficit to 1.62% of GDP in 2013 from an estimated 2.23% in 2012, with revenue collection increasing 11% y-o-y and expenditure disbursements rising 7.1%.

Here's more from Nomura:

However, the details are not as encouraging, with subsidies still far exceeding capital spending. Any subsidy policy changes are unclear at this point and the relatively low budget allocation for capex still reflects weak execution.

We revise our 2013 fiscal deficit forecast to 1.9% of GDP (from 1.1% previously), as we expect slippage on operating expenditures and the ambitious revenue targets.

On 16 August, President Yudhoyono unveiled Indonesia's 2013 budget. The government aims to narrow the fiscal deficit to 1.62% of GDP from an estimated 2.23% in 2012. This, in our view, highlights continued fiscal conservatism even though, in our view, there is scope for the government to take bolder steps to improve the quality of overall spending.

The budget assumptions are prone to downside risks, in our view. GDP growth is projected at 6.8% in 2013 versus our forecast of 6.3%, which is based on what we see as an increasingly uncertain regulatory environment that could slow investment spending . End-2013 CPI inflation is assumed at a relatively stable 4.9%, but as we argued previously the inflation outlook is more uncertain, in part due to weather-related food price inflation risks. The oil price assumption was also lowered to USD100 per barrel from USD105 in the revised 2012 budget, but the Brent spot price stands at USD118 and the futures strips imply an average USD111 for 2013.