Reviving lacklustre economy is Joko’s next challenge
JAKARTA: During the first months of this year, President Joko Widodo was an embattled leader grappling with Indonesia’s most serious political and religious tensions in two decades. Now, he has come through the storm looking stronger than ever.
His popularity is near record highs, thanks to deft manoeuvres against foes trying to exploit a blasphemy case against one of his allies, Joko has stamped his authority on the ruling coalition, parliament and the security forces.
The quietly spoken former furniture salesman may have proved his political mettle, but his next challenge is an economy that refuses to respond to conventional policies to fire up growth.
According to a June survey, 60 per cent of people polled were satisfied with Joko’s performance, almost an all-time high. But the poll showed high expectations that he would deliver on promises to revive the lacklustre economy.
“If he doesn’t perform on the economy, that would give ammunition to the opposition to challenge Joko in 2019,” said Djayadi Hanan of the Saiful Mujani Research Centre, a Jakarta-based pollster.
Indonesia’s gross domestic product (GDP) growth has shambled at around five per cent for the past two years, too low to lift the country out of the middleincome trap, largely because domestic consumption — once the engine of the economy — and bank lending have been sluggish.
An unexpected cut in interest rates last month highlighted the struggle to lift growth despite government initiatives, including a tax amnesty programme, an infrastructure drive, and a series of regulatory tweaks designed to make business easier.
The government has little fiscal room to breathe life into the economy: the budget deficit is close to a legally mandated ceiling of three per cent of GDP and Parliament could impeach Joko if he allowed the deficit to run past that limit.
David Sumual, chief economist at Indonesia’s Bank Central Asia, said a hike in electricity tariffs and slow disbursement of subsidies to farmers have weakened the purchasing power of middle-to lowerincome households.