Widodo, a former furniture salesman popularly known as Jokowi, took oath at a ceremony in the capital, Jakarta, attended by politicians and foreign dignitaries that was broadcast live on national television on Sunday.
Re-elected in polls that took place in April, the 58-year-old was sworn into office along with 76-year-old vice president Maruf Amin, who replaces Widodo’s vice president in his first term, Jusuf Kalla.
More than 30,000 security personnel were deployed in the capital with police locking down some parts of the city and closing off streets surrounding the parliament building and the presidential palace.
Mass demonstrations were also banned on Sunday over security fears.
On his way to the ceremony, Widodo got out of his convoy with some of his security escorts and shook the hands of supporters, who shouted his name, waved the country’s flag and called him “bapak” or father.
“This is the second time … most importantly, we must work together immediately to bring Indonesia to prosperity,” Widodo told reporters before leaving for Parliament, adding that he had completed the picking all members of his Cabinet.
“This will be a big problem if we fail to create enough job opportunities,” Widodo told parliament after his inauguration, where he cited his dream of Indonesia becoming one of the world’s top five economies by 2045 with a GDP worth $7 trillion.
The president said he would push two bills to replace laws that have hampered job creation, as well as warning he could sack underperforming civil servants.
Sunday’s austere ceremony under heavy security presence was in stark contrast to the more relaxed atmosphere of Widodo’s 2014 inauguration.
An October 10 knife attack by a couple linked with the Islamic State of Iraq and the Levant (ISIL or ISIS) that wounded the country’s security minister set off a security crackdown.
In April’s elections, Widodo campaigned on continuing his signature policies of big-ticket infrastructure development and pro-poor initiatives, and was elected with 55.5 percent of the vote.
But Jokowi faces fresh challenges after some of the biggest student demonstrations in decades erupted last month opposing new bills parliament had tried to push through that critics say undermine democracy and threaten basic freedoms.
On the economic side, Indonesia has struggled to lift growth above five percent in recent years despite a boom in infrastructure building and attempts to cut red tape hampering investment.