Elections set to give a big boost to Indonesia economy

Mr Acep Abdul Aziz (above) said his shop at Jakarta's historic market, Pasar Senen, is seeing a 50 per cent increase in orders for election merchandise such as T-shirts, caps, jackets, banners and name cards. Buttons featuring images of presidential
Mr Acep Abdul Aziz (above) said his shop at Jakarta's historic market, Pasar Senen, is seeing a 50 per cent increase in orders for election merchandise such as T-shirts, caps, jackets, banners and name cards. ST PHOTO: ARIFFIN JAMAR
Mr Acep Abdul Aziz (above) said his shop at Jakarta's historic market, Pasar Senen, is seeing a 50 per cent increase in orders for election merchandise such as T-shirts, caps, jackets, banners and name cards. Buttons featuring images of presidential
Buttons featuring images of presidential candidate Prabowo Subianto and his running mate, Mr Sandiaga Uno, on sale during a campaign rally in Karawang, West Java.PHOTO: BLOOMBERG

Analysts expect a strong spurt in govt and household spending

Business has been busier than usual in the last few months at Mr Acep Abdul Aziz's shop in Jakarta's historic market Pasar Senen.

With presidential and legislative polls to be held on the same day for the first time in Indonesia, the 32-year-old has had a flood of orders for T-shirts, caps, jackets, banners and name cards.

Since early January, national and regional legislative candidates from all over the country have flocked to his shop to order campaign merchandise ahead of the April 17 polls. Many are incumbents and regular customers, but there are new orders as well.

"The orders are 50 per cent higher than during normal months," Mr Acep, who runs the shop with his wife and sister, told The Straits Times.

Some orders are for 100 million rupiah (S$9,500) to 150 million rupiah worth of merchandise, said Ms Fitri Handayani, his sister.

There are many similar shops in Pasar Senen and when ST visited on Tuesday, the staff all looked busy sewing, printing and serving customers.

Elections in Indonesia, the world's third-biggest democracy, are typically held every five years. But the legislative and presidential elections are not usually conducted during the same period.

Analysts say the elections this year, like past events, may spur growth in South-east Asia's biggest economy. The government has projected the economy to expand by 5.3 per cent this year, while the central bank expects it will grow between 5 per cent and 5.4 per cent.

Last year, it expanded by 5.17 per cent, the fastest since 2013.

Mr Alan Lau, a Singapore-based OCBC Bank economist, said government spending was strong during previous polls, fuelled in part by the preparation and organisation of the elections.

Similarly, household consumption was robust as people spent more on food, transportation and other needs during the campaigning.

"Hence, for this election, we are expecting that both household and government consumption would be strong, providing a boost to growth," said Mr Lau, who estimates 5.4 per cent growth in the first quarter and 5.2 per cent in the second quarter.

Dr Mohammad Faisal, executive director of the Centre of Reform on Economics Indonesia, said that prior to the elections, the government spent more on social aid programmes and increased the salary of civil servants, boosting purchasing power.

"The big impact will be seen in household consumption and, at least, this will offset weakness of other drivers of growth," he said, referring to investment and exports.

While direct investment was up 4.1 per cent last year, exports fell 7.8 per cent to US$26.5 billion (S$35.8 billion) in the first two months of this year.

Dr Mohammad said that with private companies as well as state-owned enterprises sponsoring campaigns on the ground - including seminars, workshops and music concerts - travel agents, hotels and catering service providers will benefit from the spurt in business.

Mr Zaldi Masita, chairman of the Indonesian Logistics Association, said the elections this year are expected to push up the value of the logistics business by around 5 per cent in the months leading up to the event.

This is because election merchandise produced by shop owners like Mr Acep will need to be moved from Jakarta to provincial capitals and other regions.

"The movement of goods is also surging because of higher purchasing power triggered by more money circulating ahead of the elections," said Mr Zaldy.

A version of this article appeared in the print edition of The Straits Times on April 04, 2019, with the headline 'Elections set to give a big boost to economy'. Print Edition | Subscribe