Prabowo's Centralised Power Fuels Uncertainty in Indonesia

Indonesia's economic and political landscape has become increasingly uncertain under President Prabowo Subianto's administration, sending mixed signals to investors. On one hand, the country is facing a 'doom loop' of negative economic developments, including a plummeting rupiah, which has fallen over 7% against the US dollar in 2026, making it Asia's worst-performing currency.

However, macroeconomic and investment indicators remain positive. The International Monetary Fund projects Indonesia's GDP growth to remain around 5% over the medium term, while its fiscal deficit as a percentage of GDP is expected to be at 2.9%, lower than in Malaysia and the Philippines.

The government has consolidated its power rapidly since October 2024, controlling 80% of parliamentary seats through the Onward Indonesia Coalition Plus (KIM Plus) and appointing loyalists to Prabowo's 'Red and White Cabinet'. This centralised power structure has enabled swift policy implementation aligned with the President's priorities, including economic nationalism and state-driven growth.

Investors operating in this environment should be prepared for ongoing policy changes, particularly in strategic sectors such as mining, palm oil, and metals. The extractive sector is a key focus for Prabowo, with sustained scrutiny and state-driven changes to ownership structures, concession terms, and operating obligations expected.