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Reform-minded outsider Widodo takes over as Indonesia's president

Indonesia's Joko Widodo took over as president of the world's third-largest democracy on Monday with supporters' hopes high but pressing economic problems and skeptical rivals set to test the former furniture businessman.

Widodo's narrow victory over a former general in July's election marked the first time in the young democracy's history that a president was elected from outside the established military and political elite.

"I swear by Allah to fulfill the duties of President of the Republic of Indonesia to the best of my capabilities and in the fairest way possible," Widodo said, reading the oath of office, at a ceremony in a packed parliament.

U.S. Secretary of State John Kerry attended the inauguration along with various Asian leaders including the prime ministers of neighboring Malaysia and Singapore, the Sultan of Brunei and Australia's prime minister.

Read MoreIndonesian president-elect's principles could derail his reforms

Widodo, 53, a former mayor of the city of Solo and governor of the capital, Jakarta, is untested on the national and international stages but he already faces resistance from the establishment to his transparent, can-do approach to governance.

"He has climbed up to the top of the pyramid but he's still weak within the powerful political class," said Achmad Sukarsono, a political analyst at the Habibie Center, think-tank. "He needs time to be seen and accepted as part of that class otherwise he will face resistance."

Widodo has been struggling to build support in parliament without indulging in the old game of trading support for jobs, but his refusal to swap cabinet posts for backing has driven unaligned parties to the opposition, leaving him with a minority that is set to face resistance to his reforms.

Even Widodo's staunchest supporters have worried that his principles might stymie his reforms. But the lean, affable president with a common touch has been resolutely optimistic about working with the legislature.

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Oscar Siagian | Getty Images

Read More Indonesia's Widodo manages hopes as hostile parliament convenes

After weeks of gridlock, Widodo last week sought to improve ties when he met with opposition leader Prabowo Subianto and prominent opposition member Aburizal Bakrie, who congratulated him and pledged to support his government, though reserving the right to criticize when necessary.

"Widodo's initiative suggests that the former Jakarta governor is becoming adept at navigating in national politics," political analyst Kevin O'Rourke wrote in a research note.

Prabowo attended the inauguration.

Going up

One of his first jobs will be cutting back generous fuel subsidies to avoid breaching a legal limit on the budget deficit, which is under pressure from a shortfall in tax revenues and the slowest economic growth in the country of 240 million people for five years.

Read MoreFuel inflation a risky juggle for this Asia heavyweight

Higher fuel prices have sparked protests in Indonesia before and contributed to the downfall of long-serving autocrat and then president Suharto in 1998.

An adviser told Reuters last week the new government planned to order the steepest fuel price increase in nine years "within the first two weeks of taking office."

The government aims to spend the savings on infrastructure, education, and healthcare.

Corruption is another pressing problem. Outgoing President Susilo Bambang Yudhoyono came under criticism in his last term for not doing enough to end pervasive graft.

Read MoreIndonesia's new leader, facing growth hurdles, may focus on cutting red-tape

While Widodo has remained largely silent on his cabinet, he said last month that just over half his ministers would be technocrats. He is expected to announce his team on Tuesday.

Within weeks of taking office, Widodo will be in international limelight with an Asia-Pacfic summit in Beijing and a G20 summit in Australia.

As president of the country with the world's largest Muslim population, Widodo will be expected to join the debate on Islamist militancy.

U.S. Secretary of State John Kerry will be seeking greater cooperation from China, Indonesia and Malaysia in the campaign against Islamic State and in staunching the flow of foreign fighters to the militant group, U.S. and Asian officials said last week.