Indonesia's budget deficit would possibly reach 3.1 percent of GDP this year without a fuel price adjustment and assuming oil prices of $120 per barrel, the World Bank said in its latest quarterly report released on Wednesday.
The lender also projects a deficit of 2.5 percent of GDP provided oil prices remain high and fuel prices are adjusted in the third quarter. These projections compare with a revised Budget deficit level of 2.2 percent.
"It is not only the fiscal cost of fuel subsidies that is a concern but also the opportunity cost of the spending," the World Bank said.
Meanwhile, it said inflation in Indonesia may rise to 8.5 percent in 2012 if the government hikes fuel prices in the third quarter.
Despite risks from domestic and international environment, the lender sees solid economic fundamentals. The World Bank projects 6.1 percent growth this year, then to pick up to 6.4 percent in 2013.
by RTT Staff Writer
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