Indonesia’s economy and markets around elections

We analyse Indonesia’s economic and market trends around election cycles
Group Research, Radhika Rao04 May 2023
  • Indonesia is scheduled to hold presidential and general elections in February 2024
  • Official nomination and campaign period fall in final quarter of this year
  • We conduct an event study to analyse how the economy fared around the past elections
  • This covers six key variables, including GDP growth, inflation and FDI flows over the past four poll
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General elections are scheduled for 2024

Indonesia’s general elections are scheduled to be held on February 14, 2024, to elect the new President, Vice President, national legislative body People’s Consultative Assembly (MPR) as well as members of the local legislative bodies. The MPR consists of the Dewan Perwakilan Rakyat (DPR) i.e., House of representatives/ Lower House and Dewan Perwakilan Daerah (DPD) i.e., House of regional representatives/ Senate.

The presidential election is expected to grab the most interest, as incumbent President Joko Widodo is in his second and final term in office. The next candidate is required to be officially endorsed by a political party or a coalition which adds up to either 20% of seats in the DPR or 25% of popular votes in the prior 2019 election.

In late 2022, the election body KPU announced that 17 parties were eligible to contest the upcoming legislative elections. The ruling PDI-P i.e., Indonesian Democratic Party of Struggle is the largest party in the lower house/ DPR with ~19.3% of the total votes in the 2019 elections.

Amongst various candidates, three are viewed as frontrunners:

  • Anies Baswedan – former Governor of Jakarta backed by diverse parties, including conservative PKS, Demokrat and NasDem (latter is a part of the current ruling coalition)
  • Ganjar Pranowo – Governor of Central Java and recently named as the PDI-P candidate. Chair of the country’s largest and ruling PDIP party, former President Megawati, announced in a press conference in April that the party plans to endorse Ganjar as its candidate for the upcoming elections
  • Prabowo Subianto – Minister of Defense, endorsed by the third largest part in parliament Gerindra and National Awakening Party (PKB), both of which are part of the ruling coalition

This might be a three or two-way race by 4Q23 when the candidate list and parties backing them will be officiated. There are attempts to put together a ‘grand alliance’ to back two of the front runners, according to the local press, as the presidential and vice-presidential representatives. While little is known on the specific economic ideologies or official manifesto, political observers view Ganjar and Prabowo as candidates of continuity, whilst Anies, a change from the current policy/ economic setup. Naming of the respective Vice Presidents will also be a matter of deep interest.

More importantly, investors will watch for the direction of the broader reform process, including Omnibus laws, and scale of commitment towards the ambitious new Capital city i.e., Nusantara. Plans towards the latter has already been set into motion but material progress requires steady investment and relocation momentum to continue over the coming years, as it is viewed as one of the legacy moves of the incumbent government.

Pre-election event study

We analyse Indonesia’s economic and market trends around election cycles. The analysis is based on the past four episodes – 2004, 2009, 2014 and 2019, excluding 1999 given significant volatility in economic variables in the year due to the fallout of the Asian Financial crisis. Departing from past elections which were held in June of the year, upcoming polls have been brought forward to February. In the next few sections, we discuss the impact of the poll cycles on six variables - real GDP growth, consumption, inflation, government expenditure, FDI and currency performance.

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Radhika Rao

Senior Economist – Eurozone, India, Indonesia


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