Delta Variant Continues To Spread, Indrawati Sees Elevated Budget Deficit In 2022

Spot USD/IDR caught a bid, reacting to the combination of yesterday's greenback strength and Indonesia's continued fight against the worst Covid-19 outbreak in the region. The rate trades +58 figs at IDR14,540. A break above Jul 2 high of IDR14,568 would shift focus to IDR14,633-14,635, which capped gains on Apr 13 - 15. Bears would be pleased by a retreat under IDR14,463, which limited losses on Jul 6.

• USD/IDR 1-month NDF last seen +47 figs at IDR14,632. Gains past Jun 29 high of IDR14,666 would open up Apr 13 high of IDR14,736. Meanwhile, bears look for a dip through Jul 5 low of IDR14,493.
• Indonesia broadened its Covid-19 restrictions to dozens of localities across the country on Wednesday, at a time when its healthcare system operates beyond capacity. The number of fatalities from Covid-19 exceeded 1,000 on Wednesday, for the first time on record.
• FinMin Indrawati told BBG that the budget deficit will remain elevated next year, owing to the current resurgence of Covid-19. She estimated that the deficit will reach 4.7%-4.8% of GDP in 2022, which is close to the upper end of the gov't's projection (4.50%-4.85%).
• The minister added that plans for a tax structure overhaul will have to be partially shelved and the implementation of "some measures that are against the recovery" may be postponed until late 2022.
• She pushed back against the idea of more government debt financing by Bank Indonesia and pointed to strong demand at recent bond auctions, which allowed the central bank to stay on the sidelines.
• Indrawati will speak again today. She is set to appear at a webinar on Indonesia's pension system hosted by the CFA Society.
• Elsewhere, Indonesia's official consumer confidence index will hit the wires at some point today. It last printed at 104.40, the highest level since March 2020.
• This comes after yesterday's release of Danareksa consumer confidence, which improved to 81.4 in June from 80.2 recorded in May.