A Prabowo inauguration represents a fresh awakening for the Indonesian economy

Finally, the day that people have been awaiting is coming, on 20 October. All the markets are abuzz with speculation about who will serve as ministers of the new administration, resetting Indonesia toward a new era. The JCI has settled from a peak of around 7,900 back to 7,500 – 7,600, hovering at its base level. Political consolidation has been settled by Prabowo; it seems PDIP will be attracted back to its base, as consolidation in legislative dynamics ensures the new president will start off his presidency with a bang. A “Populist Economy” as well as an expanded budget deficit should be anticipated for at least the first year of his presidency. RAPBN-P should be in play in early 2025, approved as the legislative bodies are consolidated. SBN issuance, as well as a lower interest rate will be Prabowo's favor, with the Indonesian economy slightly better off in 2025, against a lower FY24 base line. The worst downside risk for the new presidency would be a risk of World War III, as Middle East geopolitical tensions surge.

Higher commodity prices linked to a weak Rupiah could be “more bang for our buck”

Indonesia reliably benefits from higher commodity prices, i.e., coal and CPO, accentuated by a weaker Rupiah. This will be a fine scenario for Indonesia at the moment, as current bias – minus any global conflict – might just showcase higher commodity prices in FY25, especially for coal and CPO. However, if indeed war breaks out on a global scale, the upside risk will weaken, and our economy might be stagnant, with higher government spending as Prabowo pushes his “Free Lunch” program, additional ministries, and higher government spending. If he cannot manage the revenue side well in FY25, we might end up with weaker economic growth.

Strategy - The Start of New Era

Strategy - The Start of New Era

Andre Benas

Strategy

11 October 2024 - 07.00am

Strategy - The Start of New Era

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