abrdn: Commentary on Indonesian elections

abrdn: Commentary on Indonesian elections

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Michael Langham, Emerging Markets Analyst at abrdn, comments on the Indonesian presidential election:

'Unofficial polling results show Prabowo Subianto is on track to win Indonesia’s presidential election, reaching 57% of the vote share, over the 50% needed to secure victory in the first round.

Prabowo was billed as the continuity candidate, having secured the tacit support of current and widely popular president Joko Widodo (Jokowi).

Prabowo has given his support to flagship Jokowi initiatives such as the ongoing major infrastructure project of shifting Indonesia’s capital from Jakarta to a new city of Nusantara and looks set to continue efforts to leverage Indonesia’s nickel resources.

However, Prabowo has pledged more consumption support. Under Jokowi, the large fiscal deficit ran through the pandemic was quickly consolidated back towards its historical range of 1.0-2.5% of GDP. Whether Prabowo retains fiscal discipline will be a potential challenge to Indonesia’s economic resilience.

Moreover, Prabowo will need to accelerate the country’s reform momentum to improve labour market conditions and reduce the economy’s vulnerabilities. Additionally, Prabowo’s critics have flagged that efforts to tackle long-standing issues around corruption and institutional independence could potentially stall under his presidency.

Prabowo’s victory will ease political uncertainty in Indonesia in the near term and broadly allow policy continuity. However, risks around fiscal populism and limited reform momentum could dampen Indonesia’s medium-term economic outlook.'