JAKARTA -- Capital flows into Indonesia have slowed in recent weeks on growing anxiety that opposition leader Prabowo Subianto might win next week's presidential election.
"Over the past few days I've been getting a lot of calls from [offshore] investors. A lot of the questions have been focused on whether there is any chance or possibility or any surprise that [Subianto] will win," a senior financier at a foreign bank office in Jakarta told the Nikkei Asian Review.
The banker, who asked not to be named, said about 70 trillion rupiah ($4.9 billion) flowed into Indonesia's markets from overseas in the first three months of the year. But since then, the financier said, it has been "quiet" -- "like sleeping."
Indonesia's stock market, currency and 10-year government bonds had rebounded from the final quarter of 2018, following a slump triggered by the U.S. raising rates and the trade war between Washington and Beijing.
But now the bond yield is creeping up, and the currency and stock markets are flat. Should Subianto defeat incumbent Joko "Jokowi" Widodo in the April 17 vote, analysts project slower growth in Southeast Asia's largest economy.
"A few have actually started selling, but not so much. But the big [investors], are really preparing," the banker said. "Even if there's a sign or indication that it's gonna be a close call between Jokowi and Prabowo -- could be either side -- offshore will sell."
Multiple opinion polls show Widodo holding a comfortable lead over longtime rival Subianto, but the gap is narrowing. The challenger's rallies across the country have been drawing huge crowds, with around 200,000 people attending a gathering in Jakarta on April 7. The opposition camp is also ready to challenge the result if, in a repeat of the pair's previous matchup in 2014, Widodo wins by a thin margin.
Analysts see markets favoring Widodo's re-election as it would mean fewer policy changes and uncertainty. But whoever wins, growth is unlikely to deviate much from its current pace of around 5%. This is due to headwinds from a slowing global economy, and lower commodity prices putting downward pressure on the rupiah in a country with a persistent current-account deficit.
Josua Pardede, chief economist at local private lender Bank Permata, said that a Widodo reelection would enable the president to go all out with his stalled reform agenda. He said this was because he would not have to worry about further elections -- a president can only serve two five-year terms -- and that Widodo may not be grooming anyone to be his successor.
In the first half of his presidency, Widodo was lauded as a reformist for cutting fuel subsidies and red tape. But ahead of the election he took some backward steps such as raising subsidies and nationalizing some resources.
"His economic team and the cabinet will be much more professional because he will have nothing to lose," Pardede said.
Other economists, however, are less upbeat.
"Another five-year term for Jokowi would probably lead to some more welcome progress on simplifying the business environment and a further increase in infrastructure spending," Gareth Leather from Capital Economics said in a recent note. "However, Jokowi has continued to shy away from the tough reforms that are needed to boost the country's long-run prospects."
Leather pointed to Indonesia's rigid labor laws putting a dent on manufacturing sector growth.
Peter Mumford of Eurasia Group concurred, saying the outlook for serious reforms was "fairly bleak" regardless of who wins, "partly because either administration would be constrained by entrenched vested interests."
But they both agreed that Subianto's win poses more risks to the economy, which could translate into slower growth.
"Prabowo is not as keen as Jokowi on cutting fuel and electricity subsidies, so this could mean greater fiscal risks under a Prabowo presidency," Mumford said.
Some economists say the former army general's aggressive economic nationalism rhetoric has been greeted with trepidation by foreign investors.
"His anti-foreign rhetoric could also spark capital outflows if he is elected," Mumford said. He added there may be "silent support" for Subianto that is not showing up in the opinion polls, and an upset victory would be "broadly negative" for foreign companies.
Chinese investment has expanded under Widodo, who has sought to benefit from China's Belt and Road Initiative to fund his ambitious infrastructure push. But Mumford said that the opposition leader's harder stance against China -- if his fiery campaign rhetoric is any indication -- "could create more opportunities for non-Chinese companies."
Despite foreign investor concerns about Subianto, the financier at the foreign bank does not paint a grim picture of Indonesia under him.
"I would say if he wins, he will of course try his best to make his economic team [ensure] our country's [growth] goes at least flat -- even if it's slightly slower."