The sharp fall in Indonesia’s stock market today seems to reflect growing worries about the direction of fiscal policy and the state’s role in the economy under President Prabowo Subianto, which could weaken medium-term growth and raise the country risk premium. More immediately, while we’ve pencilled in a 25bp interest rate cut at the Bank Indonesia meeting tomorrow, the recent market volatility has increased the likelihood that policymakers leave rates on hold instead.
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