Reform progress key to IDR in next 6 months

Indonesia's President Widodo continues to struggle within Parliament, not least because of his coalition's lack of a majority and underperforming ministers, despite a Cabinet reshuffle. 

This is 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. There is an expectation that infrastructure spending will pick up in H2 and it will be monitored 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",says RBC capital markets.