Indonesia may put the kibosh on its membership in the "fragile five," as its new president took bold action to eliminate much of the country's expensive fuel subsidy.
"It will be a big positive for Indonesia's economy," said Kunal Kumar Kundu, an economist at Societe Generale, in a note Tuesday. "It will lead to a major improvement in the fiscal deficit and provide the government with ample fiscal space to focus more on developmental expenditure."
On Monday, President Joko 'Jokowi' Widodo, inaugurated just a month ago, took the likely deeply unpopular step of raising subsidized gasoline prices by around 30 percent to 8,500 rupiah, or $0.70, a liter and increasing diesel prices by around 36 percent to 7,500 rupiah a liter, effective immediately. Previous fuel hikes have spurred large-scale unrest.
The central bank, Bank Indonesia, has called an extraordinary meeting for later Tuesday, although it didn't indicate whether it expected to increase interest rates to counter any increase in inflation.