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UPDATE 1-Indonesia parliament passes President Joko Widodo's $185 bln 2021 budget

* 2021 budget 0.4% bigger than 2021, but deficit smaller

* Health budget reduced in 2021, infrastructure budget increased (Adds finance minister comments at a news briefing)

JAKARTA, Sept 29 (Reuters) - Indonesia’s parliament on Tuesday approved President Joko Widodo’s $185 billion budget for 2021, which his finance minister described as both supportive for Southeast Asia’s largest economy and also the start of a fiscal consolidation.

The budget, which has a smaller fiscal deficit than this year, was approved by acclamation in parliament.

Total spending for 2021 was agreed at 2,750 trillion rupiah ($185.25 billion), 0.4% bigger than the 2020 budget, but the deficit forecast for 2021 was smaller at 5.7% of gross domestic product, compared with 6.34% this year.

This year’s budget deficit outlook is the biggest in decades because of increased spending to respond to the coronavirus pandemic.

Indonesia’s economy is set to shrink for the first time since the 1998 Asian financial crisis because of the pandemic this year, within a range of -1.7% to -0.6%. The 2021 budget assumes economic growth will rebound to 5%, said Finance Minister Sri Mulyani Indrawati.

“The 2021 budget is supportive and consolidative. Supportive meaning it will continue to support economic recovery ... and consolidative meaning the deficit is smaller,” she said in a virtual news conference after the budget was passed.

She said the fiscal consolidation would begin next year to meet a self-imposed target to bring the budget deficit to below 3% of GDP by 2023, but pledged the government would try to maintain growth momentum.

The 2021 budget sets a target for state revenue at 1,743.6 trillion rupiah, higher than this year, partly by assuming higher oil prices.

Health spending is allotted at 169.7 trillion rupiah next year, 20% below 2020’s, which was caused by one-off spending this year for COVID-19, such as building new hospitals, Sri Mulyani said.

She allocated 18 trillion rupiah to procure enough coronavirus vaccine for 160 million people, or about 60% of the country’s population, to create herd immunity. Mass vaccination is budgeted at 3.7 trillion rupiah and research at 1.2 trillion rupiah.

To boost growth, the government budgeted 413.8 trillion rupiah for infrastructure, a nearly 50% annual increase, to catch up on projects neglected during the pandemic, Sri Mulyani said. ($1 = 14,845.0000 rupiah) (Reporting by Gayatri Suroyo and Maikel Jefriando; editing by Louise Heavens, Larry King)

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