Megawati Sukarnoputri's Indonesian Democratic Party – Struggle (PDI-P) won the elections on May 9, 2014, securing the highest plurality of 18.95 percent, adding to the possibility that Joko Widodo – who will represent the PDI-P in the upcoming presidential election during July – will cruise to victory.
Of late, Indonesia has been one of the most prominent destinations for foreign direct investment (FDI) within ASEAN, receiving USD18.4 billion in FDI during 2013 – beating other states in ASEAN, with the exception of Singapore. The incoming government, provided that it is stable and clear in its economy policies, will likely attract more FDI into the country, thus helping to drive their economic growth according to the nation's long-term potential.
The PDI-P continues to underscore a focus on FDI, but recently has been paying more attention to adding value to their industrial sector, notably in the processing of natural resources and industrial manufacturing. In any case, the successive government should press ahead with national economic restructuring to attract even more investment over the long run.
Looking at the nearer term, the Indonesian economic gains from the political transition implied by this election may be limited. The rationale behind this is that it will be around the end of this year before a new president is sworn in, while national inflation and interest rates have been on the rise, weighing down both public and private spending. We at KResearch thus project that Indonesia will likely grow at a slower pace in 2014 with only 5.4 percent expansion YoY. Thailand's exports to Indonesia may record a (-)2.7 to 0.6-percent reading.
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