Indonesian President Susilo Bambang Yudhoyono, re-elected in a landslide this week, said on Thursday he would give priority to spurring economic growth amid a global slowdown, according to Reuters. Yudhoyono said he was targeting growth of 4-4.5 percent this year, and that interest rates could fall as low as 6 percent, giving growth and rate targets that are more optimistic than those of the central bank and the market. The comments sparked an immediate reaction in the market, adding to positive sentiment on the heels of Yudhoyono's election victory. Bond yields fell while the rupiah currency strengthened. "Hopefully" inflation this year could fall to 4 percent, Yudhoyono told a news conference at the colonial-style presidential palace in Jakarta. "With that achievement, the interest rate may head to 6 percent by the end of this year." Bank Indonesia forecast economic growth of 3-4 percent this year and indicated it was close to the end of its monetary easing cycle earlier this month when it cut its key rate by 25 basis points to 6.75 percent. The rupiah jumped on the spot and forward markets on Thursday on optimism of more capital inflows after the election and Yudhoyono's comments on rates. Stocks initially gained before ending flat. Enrico Tanuwidjaja, a currency strategist at OCBC Bank, said the offshore market saw Yudhoyono's win as rupiah-positive, partly on a report that cited the president as saying he would announce a major plan to sell off state-owned industrial firms. But Yudhoyono said it was too early to comment on the plans. "There will always be an overview from one period to another and within the next five years, what our SOEs (state-owned enterprises) will be like in terms of their infrastructure, the scope and size as part of consolidation ... I will reveal this later on," he told reporters. Preliminary counts showed Yudhoyono had won around 60 percent of the vote on Wednesday, averting the need for a run-off round with the nearest of his two challengers. That popular mandate may make it easier for Yudhoyono to put more able technocrats than politicians into his new cabinet, smoothing the way for reforms that would lure foreign investment, create jobs and lift economic growth. Yudhoyono, 59, has been criticised in the past for giving key posts to politicians from coalition parties to ensure support in parliament, even though these allies had little zeal for reform. "We will see more professionals in his cabinet," said Anies Baswedan, political analyst and rector at Paramadina University. "He will also be thinking abut his legacy," he added. However, analysts and commentators said there could be no honeymoon for the former army general because formidable political hazards still stood in his way, not least the formation of a coalition government. "Despite the landslide victory, there is no guarantee the president can effectively govern given the roster of his present coalition, which consist of a hodge-podge of small parties dominated by religious factions," Meidyatama Suryodiningrat wrote in an editorial in the Jakarta Post. Yudhoyono's Democrat Party formed a coalition of mainly Islamic and Islamist parties after cutting its ties with Golkar, once the party machine of former president Suharto. Even though the Democrat Party lifted its share of seats in parliament to more than a quarter in April's parliamentary election there are concerns that Yudhoyono will still struggle to push legislation through parliament.
