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irtually all analysts foresee formidable economic challenges for the new government of Joko '€œJokowi'€ Widodo and Jusuf Kalla as they must immediately grapple with big deficits in international trade, current accounts, the balance of payments and the state budget.

Mishandling these complex problems could trap the Jokowi government in a political minefield, especially because of what analysts see as the toxic coalition of opposition political parties led by losing presidential candidate Prabowo Subianto lurking in the shadows, waiting for any opportunity to make things difficult for the new government.

On the positive side, though, many analysts compare Jokowi'€™s rise to becoming Indonesia'€™s 7th president with the election of Narendra Modi in India earlier this year and Shinzo Abe in Japan in 2012.  All three leaders gained a surplus in public trust.

The big difference is that Modi and Abe rose to power with big majorities, while Jokowi enjoys support from less than 40 percent of the House of Representatives, which has to approve all the major reforms he badly needs in order implement the top-priority programs he promised to the people during his election campaign.

The uphill task immediately confronting the new government is the extremely tight fiscal space, as more than 80 percent of the total budget will be taken up by routine operating expenses. Yet more daunting is the fact that 55 percent of the total routine budget is classified as mandatory and fixed spending. These appropriations cannot be decreased because they are required by laws on education, regional autonomy and health.

Another 30 percent of the operating budget will cover personnel costs, debt servicing and subsidies. Of these spending components, only the energy subsidies (about US$31.5 billion) can be reduced.

The problem, though, is that reducing fuel subsidies has always been socially and politically sensitive. Without adequate preparation, especially with respect to social safety-net programs to cushion the inflationary impact of fuel reform among the poor, this policy could trigger a big wave of social and political turbulence.

Prolonged social and political turbulence, which would be worsened if trade unions take to the streets with protests and labor strikes to demand higher minimum wages, could turn the surplus of public trust now enjoyed by Jokowi-Kalla into a trust deficit.

As the first package of major policies the Jokowi government will launch are mostly painful in the short term, the president and his Cabinet should strive to maintain the public trust by focusing on their top-priority programs for the poor and by exhibiting high standards of integrity and accountability in public-sector governance.  

Equally important is for the new government, from the outset, to gain trust from the business community by maintaining legal certainty and establishing policy consistency and predictability. Only if investors trust the government will they be committed to making investments. Without private investment, the economy will stall because the state budget contribution to economic growth is very small.