A New Hope
Executive Summary
October 20th was a milestone date for Indonesia. For the first time in the country’s history, a regional leader was inaugurated as president. Joko “Jokowi” Widodo served two terms as mayor in Solo, Central Java (though the second term was unfinished, due to his move to Jakarta), and was elected governor of Jakarta Metropolitan Province, before becoming president. This sets a new precedent for other potential candidates from the regions. Ridwan Kamil, the mayor of Bandung, the provincial capital of West Java, has such potential. The same is true of Basuki Tjahaja Purnama, better known as Ahok, the successor of Jokowi as the governor of metropolitan Jakarta. In fact, our report was the first to identify Jokowi as a potential candidate for president, even before he was elected governor of Jakarta. No wonder Time Magazine published a story about him entitled, “A New Hope.”
It’s certainly too early to predict the nature of his presidency. However, right after the issuance of our Market Brief two weeks ago, which struck a rather pessimistic note, Jokowi was able to organize a meeting with the three parliamentary heads: the House speaker, the head of the Senate and the speaker of the People’s Assembly. That meeting succeeded in cooling the political temperature before the presidential handover of power. In fact, Jokowi also managed to meet two of his strongest opponents, Abu Rizal Bakrie, the chairman of Golkar party, and even his presidential election rival, Prabowo Subianto. The two meetings deepened the calmer atmosphere that had already been developed in meetings of the parliamentary heads. In fact, those warmer relations with the two opposition leaders continued through the presidential handover.
Jokowi also set up his new cabinet. Announced on October 26th, it started work the following day. It’s not exotically named – it goes by just “Working Cabinet,” which indicates the spirit that the president would like to see mark his government. We certainly should be watchful of what initiatives the new government takes up. But we have strong confidence in his choice of ministers.
In the economy, the most recent report of the Central Board of Statistics (CBS) announced that the trade balance in August was again in the red. Having returned to normal activities, imports surged in August, increasing more than exports. Exports rose from $14.124 billion in July to $14.475 billion in August, up 2.48%, while imports increased from $14.082 billion to $14.793 billion, a rise of 5.05%. That left a trade deficit of $318 million. Meanwhile, FX reserves at the end of September were stable, at $111 billion.
Inflation was recorded at 0.27% in September, with y/y inflation relatively stable at 4.53%. Bank Indonesia therefore affirmed that inflation continued to be under control, and at its October policy meeting kept its reference interest rate unchanged, at 7.5%.
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