Will Indonesia breach its budget deficit limit?

Indonesia’s government is cutting spending and considering new taxes as it tries to prevent the budget deficit breaching the 3% of GDP legal limit. An alternative for President Prabowo Subianto would be to ditch, or at least find a workaround for, the fiscal rules in order to press ahead with his campaign pledges. That wouldn’t be a disaster: years of prudence mean that Indonesia’s public finances are in decent shape. But it would prompt investors to demand higher risk premia on Indonesia’s financial assets, which are currently low vis-à-vis similarly-rated sovereigns.