Don't Count on Jokowi Delivering on All His Reforms, Oxford Says
(Bloomberg) -- Investors counting on Indonesian President Joko Widodo unleashing a wave of economic reforms in his second term may be sorely disappointed.
“Vested political interests and fiscal realities” will constrain the ability of Jokowi, as the president is known, to deliver on reforms, such as boosting infrastructure spending, Sung Eun Jung, an economist at Oxford Economics Ltd. in Singapore, wrote in a report Tuesday.
Jokowi’s election win has lifted investor sentiment about the economy’s outlook, with S&P Global Ratings delivering an unexpected upgrade recently. The president has pledged to pursue tougher reforms as the burden of elections no longer weigh him down, including spending billions of dollars on building power plants and airports to spur economic growth.
Jokowi’s ambitious infrastructure agenda in his first term has already resulted in wider external and fiscal deficits, rattling investors and weighing on the nation’s currency, Sung said.
“We expect the president will continue to push ahead with his investment drive and increase the budget for human development,” the Oxford economist said. “However, strict regulations with regard to investment and the labor market, together with limited fiscal resources, constrain the positive impact of these plans on medium- to long-term growth.”
The president has ordered his ministers to focus on steps to tackle the high current-account deficit that’s weighed on the nation’s currency, ease rules hindering new investment while working on a $412 billion infrastructure plan to better connect the archipelago.
Oxford Economics expects Indonesia’s annual growth to ease to 5% in the next decade from about 5.5% in the past 10 years with capital accumulation slowing to 5.9% from 6.2%, Sung wrote.
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