Reform progress key to IDR (Monthly Outlook, 6 – 12)

Indonesian President Widodo continues to struggle with opposition within parliament, preventing meaningful progress with reforms and infrastructure spending. But he has bought himself some time with the government announcing a comprehensive stimulus plan in August, aimed at increasing foreign investment, lifting exports, growth and IDR. So far, the government has announced tax holidays of between 5 and 15 years to new companies investing at least IDR1trn across a wide range of industries. 

Ministers are currently assessing regulations that are impeding investment before a policy package is issued on that front. BI expects GDP growth to increase from 4.9% in 2015 to 5.54% in 2016, RBC Capital Markets. There is an expectation is that infrastructure spending will pick up in H2 and it will be monitored this closely, along with developments in local politics and whether the President is able to move forward with key infrastructure projects as the key to the IDR outlook, added RBC Capital Markets.