Growing Confidence in the Government

INDONESIA - Report 25 Apr 2016 by Cyrillus Harinowo and Maria Kartika Purisari

In his second year in office, President Joko Widodo apparently has succeeded in garnering more confidence in his presidency. This conclusion was derived from the recent survey conducted by SMRC (Syaiful Mujani Research and Consulting), released in mid-April 2016. The path of confidence in Jokowi’s presidency has indeed been like a roller coaster. It was high in the beginning because of the euphoria after the election, then quickly eroded because of the political transition, which affected the flow of money from the government’s vaults to the economy, and rebounded now that the situation has settled down.
The strengthening of the president’s political grip has also supported the improving confidence. While at the beginning of his presidency political support was polarized, and in fact he was supported by less than a majority in Parliament, the tide has changed for the better. Currently a number of political parties that previously belonged to the opposition have changed gear and lined up behind him. Therefore, the agenda in parliament may eventually change, to the government’s gain. One contentious issue is the Tax Amnesty legislation slated for consideration this month. Tax Amnesty is indeed badly needed by the government to fill the hole in its budget. Political bickering has delayed the discussion but during a recent meeting at the Presidential Palace, it was clearly stated that Parliament would like to advance the discussion of that legislation.
In the midst of this situation, the trade balance showed a surplus for the third consecutive month in March 2016. Indonesian exports improved considerably, even as imports experienced a sharper increase. The surplus for March reached $497 million, lower than the surplus of February 2016, which was $1,136.2 million. Exports were $11,792.8 million in March, considerably higher February’s, which reached $11,312 million, an increase of $480.8 million or 4.25%. Meanwhile, imports reached $11,295.8 billion in March, compared with $10,175.6 million in February, an increase of $1,120.2 million or 11.01%. For the first three months of this year, exports were $33,585.4 million while imports reached $31,938.4 million, leading to a trade surplus of $1,647.0 million.
In the meantime, the month of March 2016 was also marked by relatively mild inflation, which reached 0.19%. Yearly inflation in March 2016 was 4.45%, a level at the corridor of the Central Bank’s inflationary target. In the midst of economic stimulus by the government, with inflation in check, the Central Bank announced the change of the benchmark rate from the Bank Indonesia Rate to the One-Week Reverse Repo rate starting August 19 this year. In the meantime, the Governor Council of the Central Bank left the benchmark rate at 6.75%, while the current One-Week Reverse Repo rate stands at 5.50%.

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