Prabowo's economic policies shake investor confidence in Indonesia

In Indonesia, President Prabowo Subianto's recent economic decisions have begun to alarm investors, reflecting a significant decline in market confidence. His administration's attempts to modify established economic structures, particularly regarding populist spending and the independence of the central bank, have contributed to a notable downturn on the stock market, marking the steepest drop in three years. Investors have expressed concerns about the fiscal outlook, especially after the government postponed the publication of January's budget data, which ultimately revealed a surprising budget deficit due to sharp decreases in both revenues and expenditures. Prabowo's administration had initially promised to boost economic growth to 8 percent, yet current measures are perceived as insufficient to meet this target. Additionally, the President has faced backlash for expanding his Cabinet significantly and for considering changes to taxation policies, including a controversial hike in the value-added tax, which he later revoked after public discontent. Observers note that many of Prabowo's policies lack a strong economic foundation and may jeopardize the credibility of his administration if not modified. The announcement of a new sovereign wealth fund, Danantara, with plans to allocate $20 billion from the national budget underlines the administration's commitment to aggressive economic interventions. However, this has raised further apprehensions regarding the military's role within the government after a law expanding its influence was hastily passed, provoking student protests and highlighting fears of a regression towards authoritarianism. While Prabowo currently possesses significant parliamentary support and the government aims to maintain a budget deficit within legal limits, the concerns mounting from both local and foreign observers may necessitate a reassessment of his administration's approach to economic governance in the near future.