REPUBLIKA.CO.ID, JAKARTA -- The quick count recorded a narrow victory between Prabowo Subianto and Joko 'Jokowi' Widodo in presidential election on Wednesday. The official result will be announced on July 22, 2014 by General Election Commission (KPU). Main issue for Indonesia's sovereign credit ratings for next 6-12 months is the economic stability and sustainability.
"For long term focus, there is two questions. What is government commitment to improve the structural reform? Will Indonesia reach a higher growth in a sustainable manner?" Direktur Senior Fitch Hong Kong Andrew Colquhoun recently.
Bank Indonesia (BI) and government efforts to tighten monetary policy and implement more flexible exchange rate have positive effect on external position.
The trade deficit in May 2014 reached 2.4 billion USD compared to the highest position at 9.1 billion USD in September 2013. Foreign exchange reserves increased 8.3 percent year to date (ytd). Tightening monetary conditions have also controlled inflation at 6.7 percent and slowed credit growth at 17.4 percent.
There was little in either candidate's election platform to suggest they might re-direct current economic policy in the short term. Even so, the next challenge for the economic stability is the importance of management for credit profile. In line with the Fed tightening policy, Fitch believes that Indonesian prospect to avoid any adverse impact due to global shock is supported by a clear priority on economic stabilization.
Indonesia's growth trend is very important to credit profile. According to Fitch, the structural reform for productivity improvement will support the prospect growth for getting back to over six percent growth like 2008. The ability of two candidates to implement policies at national level remains untested.
"Jokowi as the favourite one only offers a little guidance for policy priorities at national level," Colquhoun said.
Meanwhile, another candidate, Prabowo Subianto has raised the issue of raising sovereign borrowing to fund the investment. Fitch will wait to see if the policy is adopted and implemented.
Ikuti Whatsapp Channel Republika