Girding for the Presidential Race
Executive Summary
The parliamentary elections came off peacefully, without significant conflict, or any casualties. This is very important, because in many countries elections are synonymous with uncertainty. The smooth proceedings were praised as a signal of maturing democracy.
The many Quick Counts delivered similar results. One quite credible source, the Kompas Quick Count (produced by Kompas Daily, the country’s most prominent newspaper), showed these rankings: of 12 national parties, PDIP ranked highest, with 19.24%; Golkar ranked second, with 15.01%; and Gerindra third, with 11.77%. None of the other parties achieved 10% of the popular vote. The above three political parties have the greatest chances of advancing their presidential candidates through the constructed coalitions. However, these quick polls were a bit disappointing for the PDIP, even though it came in first, as its numbers fell below public expectations. People wondered whether the Jokowi Effect was just a myth. The stock market tumbled after the announcement, though it rebounded a week later.
In addition to the three biggest parties, a Muslim coalition could be a contender. Though each Muslim party garnered less than 10%, the five together won about 30%. The idea of a Muslim coalition has been frequently discussed. The parties will likely announce their presidential and vice presidential candidates in May. We expect two to four presidential candidates to stand for the July 9 presidential elections.
Amid such optimism, the trade balance returned to positive territory. Though mineral ore exports dropped significantly, exports of other commodities, such as Crude Palm Oil and coal, increased (as we’ve mentioned in earlier reports, the fall of CPO and coal exports in January 2014 was partly seasonal). In February 2014 exports of CPO rallied, turning CPO into the top export commodity. Exports of manufactured products varied, with some products rising, and others declining. With a significant drop in imports, the trade balance was nearly $800 million in surplus.
Inflation is still relatively muted, with March inflation at 0.08% m/m. That lowered y/y inflation further, to 7.32% from 7.75% in February 2014. These data raised Central Bank confidence in the stability of the economy – so it maintained its benchmark rate at 7.5%.
Deviating slightly from the economic optimism of our last report, the April 9 legislative elections dampened the economic outlook a bit. The government predicts growth of about 6%; Bank Indonesia recently lowered its growth prediction to below that. Yet we strongly believe that the upside will be greater over the next few months, once the presidential election ends in an outcome that satisfies the public.
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