Indonesia's economy is falling apart

President Prabowo Subianto of Indonesia meeting with former US President Joseph Biden

Prabowo Subianto promised in his presidential campaign a number of policies designed to improve the livelihood of the Indonesian people. These included free school lunches for children in education, with an estimated cost of USD$28 billion, or about 4.5% of the GDP, as well as continuing to try and improve Indonesia’s natural resource output. Now President Subianto has also started the process of shifting the country’s capital from Jakarta to Nusantara.

To finance such projects, the government has started cutting back spending in many areas. However, some members of the opposition are questioning the manner in which these cuts are happening. Government contracts subject to cuts cover important public services, including highways connecting large stretches of the country. Furthermore, menial things, such as air conditioning and worker hours, have also been decreased, which may save the government money in the short-term, but has the potential to lead to a decrease in productivity in the long-term, something the government may not be in full acknowledgement of.

Mr Subianto’s administration also created Indonesia’s first sovereign wealth funds— however, the program is plagued with a number of issues, chiefly the lack of anti-corruption checks and balances.

This has led many to believe the project to be the equivalent of a piggy bank that the president can choose to break whenever he wants with little to no consequence.

Public confidence in the economy is not Indonesia’s strong point., Investors and the public look on precariously as the country’s top finance official is rumored to be preparing his resignation. Sri Mulyani has been Indonesia’s Minister of Finance since the previous Widodo administration— one which presided over the opening of a golden age of economic development. While such allegations have been dismissed by the government, many are led to believe that this has connections to a lowering the 2025 forecasted economic growth from 4.8-5.6% to 4.7-5.5%.

All of these have resulted in a major drop-off in investor confidence. The IDX, Indonesia’s stock market, reported a fall of up to 5%, triggering a trade halt. After the halt was lifted, the markets continued their freefall, hitting a 7% fall to reach its lowest point since 2021. Furthermore, the rupiah has seen its worst decline, continuing to weaken against the US dollar as time goes on, peaking at about Rp. 16520/dollar, up 9% in the past 6 months since the beginning of the current president’s term.

Is the future of the country worth sacrificing for personal gain? This is the question that Indonesia and its government confronts today.

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