The announcement of President JokoWidodo’s second cabinet reshuffle on Wednesday (27/7) was followed by a rise in the Jakarta Composite Index (IHSG) and a strengthening of the rupiah. Coordinating Minister for Economic Affairs Darmin Nasution said that this demonstrated the market’s positive response to the new cabinet.
Market conditions following the reshuffle demonstrate that the market has greater confidence in the economic team. In other words, the market considers the combination of people selected for ministerial positions that have a bearing on the economy to be on target.
“I think most people would say that the current economic team is stronger. Not only (Minister of Finance) Sri Mulyani, but (the ministers of) Trade, Industry and so on,” Darmin said in a statement during a seminar on “The Economic and Political Thoughts of Dr. Sjahrir: Their Current and Future Relevance” at the Indonesian Stock Exchange (BEI), Jakarta on Thursday (28/7).
To maintain market optimism, coordination between economic ministries will be intensified, with a particular focus on the development of mid-term policies to do with food security.
The reason for this focus is that while food prices are rising in many countries, Indonesia has no clear food policies.
At the same event, Head of the Financial Services Authority (OJK) Muliaman D. Haddad also remarked on the market’s positive response to the new economic team. However, he believed other factors had contributed to the stronger rupiah and rising stock prices, including the passing of the tax amnesty law.
For this reason, the continuity of this market optimism will be largely dependent on the policies implemented by the government’s economic team to boost economic growth. “All that remains is to see how much (the economy) will grow. The important thing is that the market will see the follow-up,” Muliaman said.
Meanwhile, the Director of Indonesian Stock Exchange (BEI) Tito Sulistio said that the market’s current attitude reflects its appreciation of the stronger economic team of a cabinet that has Darmin as coordinator, Sri Mulyani as the Minister of Finance, and BambangBrodjonegoro in the National Development Planning Agency (Bappenas).
“Overall this is a good combination between planning, in the hands of Bambang Brodjonegoro, and Sri Mulyani. I think it’s the perfect combination for the economic team.” Tito said.
(Read: Sri Mulyani’s Two Recipes for Dealing with Economic Turbulence)
According to Tito, the composition of political parties in the cabinet following the second reshuffle is well balanced. In particular, the majority of slots on the economic team, including the positions of Minister of Finance, Coordinating Minister of Economic Affairs, Head of Bappenas, Minister of Public Works and Public Housing (PUPR) and the Minister of Transport, have been filled by professionals.