INDONESIA’S ECONOMIC POLICY LIKELY UNCHANGED UNDER PRABOWO'S PRESIDENCY -- FITCH RATINGS

JAKARTA, Feb 21 (Bernama) -- Indonesia’s economic policy would likely remain broadly unchanged under a Prabowo Subianto presidency, but uncertainty surrounding medium-term fiscal policy has increased, Fitch Ratings said.

The credit rating agency stated there will likely be more clarity over the next administration’s fiscal policies after it takes office in October.

“We believe medium-term fiscal risks have risen due to some of Prabowo’s campaign pledges, including a free school lunch and milk programme that could cost around two per cent of gross domestic product (GDP) annually,” the agency stated in a note.

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While Prabowo advocates for boosting government revenue relative to GDP, his proposal for a higher government debt-to-GDP ratio also points to risks to its baseline fiscal projections.

“Our baseline scenario is still for Indonesia’s government debt to remain on a gradually declining path. This assumes that there will be broad support across the new parliament for prudent fiscal policies and fiscal deficits of below three per cent of GDP,” Fitch Ratings stated in a note.

Indonesia typically limits the budget deficit to three per cent of GDP but temporarily eased this during the COVID-19 pandemic, swiftly reducing it to 1.7 per cent of GDP in 2023, with broad political support for fiscal responsibility.

Fitch Ratings expects real GDP growth to stay around or just above five per cent this year and next year, which would be in line with pre-pandemic outturns.

It also said that monetary and fiscal policy settings remain supportive of macroeconomic stability, at least during the remainder of this year. 

The “quick count” sample results show Prabowo, the current defence minister, winning with over 55 per cent of the vote.

Official results are due to be announced by March 20, 35 days after the elections.

Fitch Ratings said Prabowo’s ties to outgoing President Joko Widodo or Jokowi, whose son is his vice-presidential running mate, could aid in forming a broader coalition as over 80 per cent of outgoing parliament members support Jokowi’s administration.

-- BERNAMA