T

he World Bank estimates that Indonesia'€™s economic growth will continue to be moderate next year at 5.2 percent under the weight of a weak global economy, the slower-than-expected pace of domestic structural reforms and political squabbles at the House of Representatives.

That projection is much lower than the optimistic 5.6 percent forecast last July soon after the presidential election, which gave the victory to then contender Joko '€œJokowi'€ Widodo, who promised big-bang reforms to strengthen economic competitiveness.

But the latest projection made in the World Bank'€™s fourth quarterly report on the Indonesian economy conveys a more pessimistic message: The delivery of change will be much slower than expected.

Putting next year'€™s growth only at 10 basis points higher than this year'€™s expected expansion of 5.1 percent means the new government will not be able to jump start higher growth as expected.

Certainly the government and even the private sector remain more optimistic. Bank Indonesia still sees 5.8 percent growth, similar to last year'€™s expansion, while the Indonesian Chamber of Commerce and Industry (Kadin) foresees more robust growth of 7 percent.

We tend to agree with the World Bank'€™s moderate projection, given the enormous challenges encountered at the House and in the reform of the bureaucracy, which has for more than four decades been addicted to the rent system.

The external environment does not help either because only the US will likely see a stronger recovery while the rest of the world, notably Europe and Japan, will remain in a slump. Even China, the world'€™s second largest economy and Indonesia'€™s largest trading partner now, will continue to see a slower pace of growth. This means the commodity sector, which saw its boom end last year, will remain weak, unable to become a main driver of Indonesian exports.

Even though recent fuel reform will produce more than US$8 billion in additional savings, we do not expect strong pump-priming in productive investment, especially in infrastructure, because of the government'€™s perpetual low-budget execution capacity.

The World Bank said during the first 10 months of this year that only 38 percent of the investment budget had been implemented. This was even below execution rates in 2012 and 2013.

Given the persistently weak global demand for commodities, the current account deficit, though already on a declining trend, will continue to be a great concern for the market.

Another major downside risk is the upcoming monetary tightening in the US that could trigger a massive capital outflow from Indonesia, like that of mid-2013, when more than $10 billion exited the country immediately after the first bout of tapering by the US Federal Reserve.

Hence, until the new government gains market confidence in its policy making and implementing capacity, and until the hostile attitude of the coalition of opposition parties in the House moderates itself to giving constructive oversight, the economy will simply muddle through next year, languishing at between 5 and 5.4 percent growth rate.