UPDATE 1-Indonesia president urges economic "reboot", boost to health care

* President Widodo proposes $187 billion 2021 budget

* Planned budget amounts to 5.5% of GDP deficit

* Targets healthcare, social assistance

* 2021 GDP growth seen at 4.5%-5.5%, vs near flat in 2020 (Recasts to adds president's budget speech)

By Gayatri Suroyo and Tabita Diela

JAKARTA, Aug 14 (Reuters) - Indonesia must use the coronavirus pandemic to reboot Southeast Asia's biggest economy, President Joko Widodo said on Friday, as he proposed a $187 billion 2021 budget that includes spending more on healthcare, including vaccines, and infrastructure.

Widodo made the remarks in his annual state of the union and budget speeches to parliament. Due to coronavirus precautions, less than half of the lawmakers were present for his address, with the rest watching online.

Likening the current economic situation to "a computer crash", he said Indonesia, along with other countries, must "shutdown, restart and reboot".

"We must capitalize on the crisis as a momentum to make a big leap," he said.

Widodo proposed a 2,747.5 trillion rupiah ($186.65 billion) 2021 budget, up 0.3% from this year.

He said the fiscal deficit should dip to 5.5% of GDP, from 6.34% in 2020, the highest in more than a decade as the government sought to shield the economy from the pandemic.

Indonesia has recorded the highest death toll due to coronavirus in Southeast Asia, though authorities have been pushing to reopen the economy.

Economic growth should rebound to 4.5%-5.5% next year, Widodo said, compared with government projections of stalled growth this year and a 5% rise in 2019.

The budget showed "the government is pretty optimistic about its expectation for economic recovery even as we see globally that the recovery in developed economies has been pretty slow," said Josua Pardede, an economist with Bank Permata.

Widodo, who allocated $1.7 billion for COVID-19 vaccines and research, said accelerating reform of the health sector was a top priority, along with strengthening food supply chains, including with a newly planned food estate on Borneo island.

He also highlighted plans to slash oil imports by using fuel made from palm oil, including by expanding the green diesel state oil firm Pertamina successfully made from 100% palm oil.

The so-called D100 would absorb a minimum of 1 million tonnes of farmer-produced palm for 20,000 barrels of production capacity per day, Widodo said, without giving a timeframe.

Cash and food assistance, tax breaks and programmes to support small firms would continue next year, though would fall to $24 billion, compared with $47 billion this year.

To aid economic recovery, $28 billion of infrastructure spending was proposed. ($1 = 14,720.0000 rupiah) (Additional reporting by Maikel Jefriando; Editing by Ed Davies and Alex Richardson)

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