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What next for Indonesia?
The Indonesian president, Joko Widodo, has won a second five-year term. Global investors will be watching him carefully.
The Indonesian president, Joko Widodo (informally known as Jokowi) has won a second five-year term. Global investors will be watching him carefully. At first, Jokowi was seen as a "breath of fresh air, a liberal-minded reformer, a pragmatic achiever and a paragon of secularism", says The Economist. In a country where 88% of the population is Muslim, and "religion and politics have made violent bedfellows," he was a welcome new face.
During his first term, he oversaw improvements in Indonesia's poor infrastructure and also managed to trim the government's fuel subsidies. But to get re-elected he "betrayed his principles" by making common cause with a hard-line cleric and suppressing some of the opposition. This tendency to court the Islamist vote may be watering down his drive for reform: recent populist moves include nationalising a mine and reversing some of the fuel subsidy cuts.
The economy has expanded at an annual rate of 5% in recent years, and GDP per head is twice that of India. The World Bank's ease-of-doing-business rankings show a rise from 120th in 2014 to 73rd in 2019, between Mongolia and Greece. However, the nation continues to punch below its weight economically, says Craig Mellow on Barron's. GDP growth still lags behind the Philippines and Vietnam. The stockmarket is only half the size of Apple's market capitalistaion, and Indonesia has just four "unicorns" (private companies valued at $1bn or more) compared to China's 150.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
But there has been scant progress on freeing-up Indonesia's rigid labour market. Everyone is hoping that Jokowi will be more inclined to take on vested interests now that the election is out of the way, says Gareth Leather of Capital Economics, but "we are not holding our breath." Meanwhile, headwinds continue to mount, as global growth has slowed and commodity prices have dwindled. The large and growing current account deficit, moreover, makes the country vulnerable to a reversal in global risk appetites. Stocks may be in for a bumpy ride.
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Marina Gerner is an award-winning journalist and columnist who has written for the Financial Times, the Times Literary Supplement, the Economist, The Guardian and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany.
Marina is also an adjunct professor at the NYU Stern School of Business at their London campus, and has a PhD from the London School of Economics.
Her first book, The Vagina Business, deals with the potential of “femtech” to transform women’s lives, and will be published by Icon Books in September 2024.
