Investors worry over Indonesia's economic policies and instability

President Prabowo Subianto of Indonesia is facing rising investor unease over his economic policies. His recent decisions have raised concerns in financial markets, leading to a significant drop in the stock market this week. Prabowo, who became president in October, is known for his populist spending measures and plans to loosen regulations surrounding the central bank. He has also introduced policies that target foreign businesses. His actions have sparked protests among students in Jakarta, demonstrating public discontent. The situation worsened when rumors circulated that Finance Minister Sri Mulyani Indrawati might resign. This speculation caused Indonesia’s stock market to decline sharply, prompting officials to clarify the minister's position. The Bank Indonesia had to intervene to stabilize the country’s currency, which is currently the weakest in Asia this year. Investors are worried about the government’s fiscal outlook. Indonesia has improved its economic credibility in the past, but Prabowo's current policies might reverse this progress. He has increased cabinet size and proposed costly programs, such as a $30 billion annual free lunch initiative for students, funded by cuts in other areas like infrastructure. The financial situation appears shaky as the government's budget data showed unexpected deficits, raising doubts about Prabowo’s ambitious growth targets. Analysts believe that his focus on populist promises may need to shift to ensure economic stability. There are also concerns regarding a newly created sovereign wealth fund, which would oversee state-owned enterprises and report directly to Prabowo. This has led to fears of less oversight and increased control over the economy. Historically, Prabowo's actions echo Indonesia’s past under authoritarian rule, raising questions about the future of its democracy. Protests have erupted, with students demanding the reversal of new military laws that could expand the military's influence. Despite the turmoil, Prabowo holds strong parliamentary support. The government has assured that state revenues will improve soon and maintains a commitment to keep the budget deficit within legal limits. However, experts caution that the current trajectory demands careful adjustment to avoid worsening the economic situation.