* 2021 GDP target set at 5%
* MPs, govt agree to cut tax target, raise spending slightly
* Budget committee chairman asks govt not to widen 2021 deficit further (Adds details)
JAKARTA, Sept 11 (Reuters) - A key Indonesian parliamentary committee on Friday reached an agreement with the government to expand the 2021 budget deficit target to 5.7% of gross domestic product, from 5.5% initially proposed by President Joko Widodo, the committee chairman said.
The 2021 economic growth target was approved at 5%, the midpoint of the president’s proposed range of 4.5%-5.5%, while the rest of the budget assumptions were approved by the budget committee without changes, said committee chairman Said Abdullah.
The official outlook for GDP this year is within a range of 1.1% contraction to 0.2% growth, versus 2019’s 5% expansion.
The wider deficit was due to an agreement between the committee and government officials to raise spending slightly and reduce the tax revenue target for next year.
The total spending for 2021 was temporarily set at 2,750 trillion rupiah ($184.69 billion), up from the 2,747.5 trillion the president proposed in August.
The new target for total state revenue was 1,743.6 trillion rupiah, down from the August proposal of 1,776.4 trillion rupiah.
The committee chairman said the new tax target was more realistic, given an uncertain economic recovery path with the COVID-19 outbreak still raging.
“If the (tax) target isn’t reached, the government has to have a good risk management so as not to add onto the budget deficit,” he said.
Finance Minister Sri Mulyani Indrawati said the additional spending approved was due to bigger allocations for energy subsidies and other spending that took into account economic uncertainties.
Lawmakers did not discuss how plans to reinstate large-scale social restrictions in the capital Jakarta starting Monday would affect the outlook for Southeast Asia’s largest economy.
Sri Mulyani on Thursday said such restrictions will have “serious impact on the social economic conditions of society”, according to a local media report.
The committee’s approval will be voted on by parliament later, but its endorsement is usually passed. ($1 = 14,890.0000 rupiah) (Additional reporting and writing by Gayatri Suroyo Editing by Ed Davies)
Our Standards: The Thomson Reuters Trust Principles.