Prabowo Subianto Poised for Presidential Victory in Indonesia
JAKARTA — In a significant political development, Indonesia’s Defense Minister Prabowo Subianto is set to become the nation’s next president following a decisive mandate from voters during the February 14 election.
With approximately 75% of votes tallied, the General Elections Commission reports that Prabowo, alongside his running mate Gibran Rakabuming Raka, has secured nearly 59% of the vote. Gibran is notably the son of outgoing President Joko Widodo.
Having transformed his image from a controversial ex-military general to a more relatable political figure, Prabowo is expected to maintain continuity with the current administration’s policies—an approach that resonates positively with both investors and businesses.
The last decade under President Widodo has seen Indonesia’s GDP grow at a steady rate of around 5%, with foreign direct investment reaching record levels, particularly in the nickel sector, driven by significant government spending on infrastructure.
Experts caution, however, about the potential risks of Prabowo deviating from the established economic path. “A major shift in economic policy could be detrimental, especially when comparing with the current administration’s successful track record,” noted an economist.
As Prabowo’s campaign progressed, he emphasized the importance of continuing the Widodo administration’s downstreaming policy, aimed at processing nickel ore domestically to foster a supply chain for electric vehicles, as well as extending this approach to other essential metals like bauxite and copper.
Erick Thorir, an ally of Prabowo and the Minister of State-Owned Enterprises, indicated ambitions to expand these policies into the agro-industrial sector, highlighting plans to open vast agricultural lands and bolster biofuel usage for enhanced national security.
Ambitious Promises Raise Concerns
Prabowo’s campaign has been marked by ambitious pledges, including free school meals and increased financial support for rural areas, with potential costs reaching 450 trillion Indonesian rupiah (approximately $28.9 billion). Clarity on funding these initiatives remains uncertain, as proposed adjustments to fuel subsidies have drawn skepticism.
While Prabowo suggests enhancing tax collection via a new independent revenue agency, analysts express concerns about the implications for fiscal discipline. There are warnings of increased deficit spending if fiscal policies are altered significantly.
Amid mixed reactions, some experts argue there exists room to raise the budget deficit cap from the current 3% to 6%. With Indonesia’s debt-to-GDP ratio currently at a manageable level compared to its regional neighbors, responsible spending will be crucial to ensure economic stability.
Investor Expectations for Clarity
As Prabowo approaches his presidential inauguration, investors eagerly await his pick for finance minister, with expectations that the position will not be held by Sri Mulyani Indrawati, the current minister, given Prabowo’s criticisms of her handling of the defense budget.
With several potential candidates being considered, including current Health Minister Budi Saidikin, who has received praise for his leadership during the pandemic, and deputy minister of finance Suhasil Nazara, investors remain cautiously optimistic about a technocratic appointment.
Nonetheless, the diversity in candidate backgrounds raises questions, especially regarding how closely their economic strategies align with Prabowo’s vision. Ultimately, stakeholders are looking for reassurance and clarity as negotiations with coalition partners unfold before Prabowo officially assumes office in October.
