The key question — will there be a constructive political setting?
There are reasons for optimism. Since Indonesia began its democratic reforms 26 years ago, it has evolved into a system of consensual governance where a large number of political parties form a broad coalition to back each president. We think something similar will be worked out in the coming months before Prabowo formally takes over although there will be some hard bargaining before there is an agreement. In the end, we think that Prabowo will have a comfortable majority in the new parliament that will allow him to pass legislation to support his agenda.
Indonesia has had a good run in its 10 years under President Joko Widodo, affectionately known as Jokowi. The economy has withstood a series of challenges including the pandemic, the worldwide inflation surge, the spike in global interest rates and the Ukraine crisis. Growth has been fairly steady and the rupiah has stood up quite well in the face of many episodes of global financial turbulence unlike in the past when it tended to weaken at the first hint of trouble. Within the country, there is a general feeling that Jokowi has delivered for the citizenry — the people see improving infrastructure, decent support for the poor and measures being put in place to take Indonesia forward.
Little wonder then that the mere indication of Jokowi’s support for General Prabowo Subianto’s candidacy was enough to propel the latter to a comfortable victory in the presidential election. Now the question is — where will Prabowo take Indonesia when he is formally sworn in as the country’s new leader in October? He certainly has a strong foundation to build on, which should allow Indonesia to enjoy a period of continued good growth and stability. But this is not a given. If Prabowo can ensure three things — a harmonious political setting, sound fiscal and monetary policies and well-thought-out industrialisation strategies — then Indonesia’s future is likely to be bright.
