Rudi Wahyono, Executive Director of the Indonesian Center for Information and Development Studies (Cides), believes that Indonesia's economic expansion in 2014 will be divided in two stages: before and after the legislative and presidential elections. Before the 2014 elections, Wahyono expects that economic growth will be slightly lower at 5.7 percent compared to the period after the elections when growth is expected to hit 6 percent. Growth in the first half of 2014 will be less strong as investors are waiting for the election results.
Once a new president is elected (incumbent President Susilo Bambang Yudhoyono cannot participate as the constitution stipulates a two-term limit to the Indonesian presidency) investors will be more enthusiastic to invest as the new president will unfold his vision and plans for the next five years. This will provide a certain amount of assurance and confidence within the country's investment climate. But it is also important that the new president will not deviate too much from the foundation that was laid by his predecessor. For example the ambitious Masterplan for Acceleration and Expansion of Indonesia's Economic Development (MP3EI) should remain a priority.
The main pillar of economic expansion in 2014 continues to be formed by domestic consumption. At present, domestic consumption accounts for about 55 percent of GDP growth. With inflation being back under control, Indonesia's domestic consumption is expected to gain significance next year. In 2013, inflation accelerated to nearly 9 percent (year-on-year) after the government increased prices of subsidized fuels in June 2013.
Indonesia's legislative election is scheduled for 9 April 2014 and the presidential election for 9 July 2014.