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12/17 09:11
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Protests and Economic Impact: Indonesia is currently experiencing significant protests against rising living costs, high unemployment, and perceived excessive pay for lawmakers. These protests have negatively affected investor sentiment, leading to a 3.6% drop in the Jakarta Composite Index and the Indonesian rupiah depreciating to 16,500 against the U.S. dollar, marking its weakest level since August 1.
Investor Sentiment: Despite the unrest, market analysts believe that the underlying growth potential of Indonesia remains intact. Howe Chung Wan from Principal Fixed Income noted that the recent selloff was primarily driven by sentiment rather than fundamental changes in the economy.
Government Actions: In response to the protests, President Prabowo Subianto has pledged to address public concerns, including reducing lawmakers' allowances, which are reportedly ten times the country's minimum wage. This move aims to quell public anger and restore confidence in the government.
Long-term Growth Prospects: Economists like Radhika Rao from DBS emphasize that Indonesia's long-term growth drivers are still strong. Investors are keenly observing the government's commitment to boosting growth and job creation, especially in light of potential spending cuts aimed at alleviating unemployment.
Escalation of Protests: The protests have escalated into violence, with reports of rioters targeting lawmakers' homes and government buildings. The unrest was triggered by the death of a motorcycle taxi driver during police action, leading to widespread calls for police reform.
Casualties and Government Stance: The protests have resulted in at least five deaths and hundreds of injuries, marking a significant crisis for the government since President Subianto took office. The president has warned of firm action against violent demonstrators, indicating a tough stance on maintaining order.
Bond Yields: Following the protests, yields on Indonesia's 10-year government bonds increased to 6.335%, while 30-year bond yields remained stable at 6.850%. This reflects the market's reaction to the ongoing political instability and investor concerns.
Future Expectations: Analysts predict that the current softness of the rupiah is likely temporary and will improve as domestic uncertainties are resolved. The central bank is expected to maintain an accommodative policy to support the currency and stabilize the market.
