Indonesia's budget deficit to surprise on the downside

Indonesia's budget deficit is not expected to touch the 3% of GDP. The provisional fiscal deficit for 2014 printed at 2.2% of GDP, lower than our forecast of 2.5%.

Given that there was a significant underperformance on the revenue front, the government was forced to curtail its expenditure - in terms of reducing the final allocation to the line ministries' budgets as well as capital expenditure.Of course, savings on the oil subsidy front from late November helped.

"For 2015, we expect the government to adopt a similar strategy of cutting its expenditures as economic reality hits. However, we do not expect a deep cut as that could pull down the growth rate drastically. Therefore, we increase our budget deficit expectation for 2015 to 2.6% of GDP" Said Societe Generale in a report on Wednesday