Indonesia s populist policies lead to weak investor confidence drag stock market down Analysts

JAKARTA - Indonesian President Prabowo Subianto’s slew of populist programmes that require massive funding, declining tax revenues and questions over new sovereign wealth fund Danantara taking the reins at state-owned entities (SOEs) all converged to dent investor sentiment on March 18, sparking a market sell-off as Indonesian stocks tumbled to levels not seen in over a decade, analysts said.

The Jakarta Composite Index, Indonesia’s main stock index, fell by as much as 7 per cent, the biggest intraday slump since September 2011, triggering a temporary trading halt during the morning session before closing at 6,223.4 points, or 3.8 per cent lower than the previous day.

Growing worries over a weakening economy and slowing consumption in South-east Asia’s largest economy shook investor confidence, resulting in the market sell-off, analysts and economists said.

They said there are doubts about whether the Prabowo administration can sustainably fund populist programmes that have placed a strain on already stretched finances and prompted widespread austerity measures. These include the President’s signature billion-dollar free meals programme for schoolchildren and pregnant women launched in January, which aims to feed 17.5 million people by the end of 2025 alone.

“The government is launching ambitious populist policies, but we see the funding is not there,” Mr Anthony Budiawan, an economist with Jakarta-based think-tank Political Economy and Policy Studies, told The Straits Times.

Concerns about Indonesia’s growth prospects are mounting, following Mr Prabowo’s recent directives to reallocate funds towards his priority projects. The country posted a rare budget deficit early into the year, amid declining state revenues.

A 30 per cent drop in Indonesia’s tax revenue in January-February 2025 has analysts and economists fretting about the country’s fiscal health, as they warn of the risk of a widening budget deficit as Mr Prabowo presses on with his costly spending plans.

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