JAKARTA, March 13 — Indonesia's senior economic minister has said that the country may impose additional taxes on certain commodities, such as palm oil, if the government needs to reduce the impact on the budget from rising global oil prices.
Speaking at a briefing of the national Cabinet today, Airlangga Hartarto said that Indonesia, a global commodities powerhouse and the world's largest producer of palm oil and nickel, could also impose additional taxes on nickel, gold, and copper.
At the briefing, President Prabowo Subianto said austerity measures could be taken to reduce the impact of rising global oil prices.
Airlangga said government modelling has revealed that if the Iran war caused oil prices to stay high, it would be difficult to keep the fiscal deficit under a legal mandate of three per cent of the gross domestic product (GDP), without cutting spending or reducing economic growth.
"These are scenarios we may have to discuss," he said, and spoke about the option to issue an emergency order if the deficit limit needed to be breached.
The government had forecast three scenarios to predict how the Middle East war could impact Southeast Asia's largest economy.
Under the first scenario, where the war lasted for five months and crude oil averaged US$86 a barrel this year, the rupiah would fall to 17,000 per United States (US) dollar, which would mean that growth would be maintained at 5.3 per cent, but the fiscal deficit would hit 3.18 per cent.
In a scenario where crude averaged US$97, growth would drop to 5.2 per cent and the deficit would hit 3.53 per cent. He added that the worst-case scenario had crude averaging US$115, which would mean the deficit would cross four per cent of the GDP.
Oil prices extended their climb today as disruptions in the Gulf from the Middle East war outweighed US and International Energy Agency measures to ease supply concerns.
Brent futures for May LCOc1 were up ¢88, or 0.9%, to US$101.34 a barrel at 0918 GMT, heading for a weekly increase of nine per cent. U.S. West Texas Intermediate (WTI) crude for April CLc1 was up ¢26, or 0.3 per cent, at US$95.99 a barrel, set for a six per cent rise for the week.
Earlier today, Goldman Sachs predicted that Brent oil would average more than US$100 a barrel in March and US$85 in April due to the war, damage to Middle East energy infrastructure, and disruptions in the Strait of Hormuz.
