The upcoming national elections in the first half of 2024 are poised to take centre stage. Currently, there is no clear frontrunner. However, the most likely winner would be Defence Minister Prabowo. He serves as the chairman of the Gerinda party and has selected Gabran, Jokowi’s son, as his running mate for the vice-presidency. Notably, Jokowi has subtly endorsed this pairing. Our expectation is that they will win the second round scheduled for June. In the wider context, both the candidates are continuity candidates with shared goals such as the continued development of the new capital Nusantara, increased infrastructure investment more downstream FDI for Indonesia’s abundant commodities.
Despite growth remaining in the 5% range next year, the economic landscape may shift slightly. Private investment could decrease as companies exercise caution in the first half of the year, awaiting clarity on the election outcome and associated policies. However, this potential decline in private investment is likely to be counterbalanced by increased consumption.
In election years, we typically witness a surge in government spending. This boost is directed towards election preparation, infrastructure development, and additional cost-of-living support. Consequently, consumption is expected to outpace GDP growth next year.
Furthermore, as the US dollar weakens, interest rate cuts are anticipated. These cuts will further enhance confidence levels. We also foresee stock market valuations gradually returning to historical norms.