Indonesia Economic News

[weijian]

Everyone does hope that it is business as usual.

Third time’s the charm: Prabowo claims victory in Indonesia presidential election

This followed the results of an unofficial “quick count” by several independent pollsters, which put him firmly ahead of his two rivals in the race, former Jakarta governor Anies Baswedan and former Central Java governor Ganjar Pranowo.

“Prabowo’s apparent one-round victory should remove uncertainty over who will lead the next administration. He, of course, appears to be Widodo’s choice of successor and has promised policy continuity, which should provide some reassurance to investors,” said Barclays economist Brian Tan.

“That said, we sense that investors are also cautiously watching what a President Prabowo would mean for fiscal policy, and whether the prudence under Finance Minister Sri Mulyani Indrawati will be maintained into the next term of government.”

“We may see business as usual, so economic growth may stay at around 5 per cent. The hope is that the president and vice-president will pick an economic team from technocrats to ensure economic policies are evidence-based and use accurate data, not because of economic nationalism or the interest of certain groups,” he said.

https://www.businesstimes.com.sg/interna...l-election

[weijian]

Our environment mounds us. And when we find ourselves in a new environment, we change. Many years ago, Jokowi was celebrated for squeezing with the masses in a flight economic cabin to attend his younger son's graduation ceremony in Spore. Now, he has been heavily criticized by many outsiders for doing what it took to install his elder son as Prabowo's deputy.

The late Suharto came into power via military unrest. Now, his son-in-law Prabowo comes into power via political unity. Is Prabowo going to be more Jokowi-like than Suharto-like? I guess we can only wait to see the sort of legacy Prabowo wants to leave behind...

Indonesia launches Danantara investment fund, channels US$20 billion into 20 strategic projects

The funds will be allocated to key sectors such as downstream nickel, bauxite, copper, artificial intelligence, oil refineries, petrochemical plants, food production, aquaculture and renewable energy – programmes central to President Prabowo Subianto’s ambitious goal of achieving 8 per cent economic growth.

With an estimated US$900 billion in assets under management, Danantara is poised to become one of the world’s largest sovereign wealth funds, propelling it to fourth place globally, ahead of its counterpart funds in Saudi Arabia and Singapore.

Prabowo emphasised that its role not just as a financial powerhouse, but also as a powerful development tool that will reshape how the nation manages its wealth, ultimately driving greater prosperity for its people.

Danantara was founded by redirecting the dividends from seven major SOEs – Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, PLN, Pertamina, Telkom and Mining Industry Indonesia. These dividends, amounting to 1,000 trillion rupiah (S$82 billion), were drawn from the 2023 financial year.

With the appointment of figures with strong political and business backgrounds, concerns have emerged that the fund may end up serving the interests of certain elites rather than fulfilling its mandate as a transparent and accountable national investment manager.

Achmad Nur Hidayat, a public policy analyst from UPN Veteran Jakarta, cited Malaysia’s 1MDB scandal as an example of how political dominance over an institution undermined the rule of law. “The same concerns apply to Danantara. If this institution is more influenced by political interests than by strict regulations, similar scandals could occur,” he pointed out.

https://www.businesstimes.com.sg/interna...c-projects

[weijian]

I have met enough native Indonesians in my lifetime to conclude that on aggregate, there is a stunned growth problem. As such, I would think that Prabowo's gov budget cuts to redirect spending towards the Free School Meal program is a good move. And that is something you probably wouldn't expect from a President who failed in 2 out of last 3 elections.

But when budgetary cuts in one area is met with dropping commodity prices/export demands, then there could be a perfect storm coming in the near term.

‘Didn’t expect to struggle like this’: Indonesian workers in a bind as budget cuts, global headwinds bite

A recent job fair that offered some 2,000 roles but drew 25,000 people - with many shoving, screaming and fainting - has highlighted the plight of Indonesia’s jobseekers. Is the country doing enough to create jobs?

In an unexpected move earlier this month, it also U-turned on a state budget austerity measure and lifted the ban on civil servants travelling out of town and holding meetings at hotels. It allowed regional governments to resume off-site meetings and official trips to spur the economy and prevent further layoffs in many sectors.

https://www.channelnewsasia.com/asia/ind...wo-5184046

[weijian]

Indonesian stocks recover as authorities attempt to allay investor worries

Authorities in Southeast Asia's largest economy sought to address concerns raised by index provider MSCI, with Indonesia's financial regulator indicating it would double the free-float requirement for listed firms to 15 per cent as part of its response.

The benchmark Jakarta Composite Index cut losses to trade down 1.7 per cent from an earlier slide of 8 per cent - which triggered a trading halt - following Wednesday's 7.4 per cent tumble.

The appointment of his nephew, Thomas Djiwandono, to the central bank this month, after last year's abrupt sacking of respected Finance Minister Sri Mulyani Indrawati, has shaken confidence in his fiscal stewardship and pushed the rupiah to record lows.

A downgrade to frontier market status, which analysts so far believe is unlikely, would bring Indonesia on par with Bangladesh, Pakistan, Sri Lanka and Vietnam.

"Indonesia is facing macro challenges, including soft private consumption, slowing credit growth, and a rising fiscal deficit that is close to the legal 3 per cent of GDP limit."

Overseas investors sold 13.96 trillion rupiah (US$834 million) worth of Indonesian shares in 2025, the worst year for outflows since 2020, with the selloff continuing in January, LSEG data showed.

https://www.channelnewsasia.com/business...ts-5892911

[weijian]

The free meal program was launched in early 2025 and used only ~55tril rupiah (3.5bil usd) for the whole 2025 as it took time to ramp. By 2026, a whopping 335tril (~20bil usd) was budgeted for the year and to put the figure into context -  Indonesia's 2026 free meal budget is still ~30% higher than the fuel subsidy bill that the Msian Gov is expected to foot even in the context of higher crude prices for 2026.

Gemini's summary of budgetary cuts:
- Original 2026 Budget: Rp335 Trillion ~$19.8 Billion usd)
- May 2026 Revision: Rp268 Trillion (~$15.1 Billion usd)
- June 2026 Proposed Paring: ~Rp218–228 Trillion (~$13 Billion usd)

With the latest revision, it will be similar in size to Msia's own fuel subsidy program.

Indonesia weighing US$2 billion cut to Prabowo’s signature free meals programme: sources

[JAKARTA] Indonesia is preparing to scale back President Prabowo Subianto’s flagship free meals programme, with officials weighing another Budget cut of more than US$2 billion along with reductions in kitchens and beneficiaries, according to two sources familiar with the matter and an internal presentation.

The planned move marks one of the clearest indications yet of mounting fiscal and governance pressures on Prabowo’s most important and expensive campaign pledge, which has been central to concerns about Indonesia’s fiscal discipline.

Two sources familiar with the plans told Reuters the National Nutrition Agency (NNA), which runs the programme, is targeting a reduction of at least 15 per cent from its 268 trillion rupiah (S$19.3 billion) Budget this year – equivalent to about 40 trillion rupiah – after identifying inefficiencies.

https://www.businesstimes.com.sg/interna...me-sources

[weijian]

FTSE recently gave Indonesia a pass in its annual review and so MSCI's multiple downgrade proposal is much a shocker I suppose.

MSCI proposes downgrading Indonesia to standalone market status

Harry Su, managing director of research at Samuel Sekuritas Indonesia, said a direct downgrade from emerging market to standalone market status would be rare and severe, as MSCI would typically take a more gradual approach by first moving a market to frontier market status.

MSCI said it expected to proceed with the reclassification unless feedback from the consultation provided clear evidence of material improvements in market governance and functioning.

The final decision will be announced by Jun 30, 2027, with feedback accepted until Apr 30, 2027. MSCI may also provide an interim update on market participants’ responses during the consultation period.

MSCI said significant concerns remained over market dysfunction, including suspected coordinated trading and insufficient evidence of meaningful enforcement. Market participants also indicated that moving Indonesia to frontier market status would not adequately reflect the severity of the problems identified, MSCI said.

https://www.businesstimes.com.sg/interna...ket-status

[gzbkel]

‘A Ticking Time Bomb’: An Economic Crisis Looms in Indonesia

Novri Putra graduated from college in Jakarta last year with a degree in information technology and a modest ambition: a stable job.
He had every reason to believe that he was on track. When he entered college in 2018, Indonesia’s economy was flourishing. Its tech sector was booming and demand for software engineers was surging.
Those days are over. Today, Mr. Novri, 28, works for a tech company — not as a web developer, as he had hoped, but as a motorcycle taxi driver making about $220 a month.
“My parents scold me almost every day,” Mr. Novri said. “Honestly, they probably feel a sense of shame that their child went to college and ended up as a motorcycle taxi driver.”
Mr. Novri’s predicament speaks to a greater malaise in Indonesia, where an economy once known for its stability is showing alarming signs of strain.
(...)

https://archive.li/cH3vD