Times Are Changing: Can Indonesia stay the Course?

Maria Monica Wihardja, Mohamad Ikhsan and Vivi Alatas

Bulletin of Indonesian Economic Studies, 2025, vol. 61, issue 2, 169-204

Abstract: President Prabowo Subianto’s first 10 months in office have been marked by shifting domestic and global dynamics. Domestically, his populist, project-driven and fiscally expansionary approach has been unfolding in an inherited fragile institutional environment, putting pressure on Indonesia’s longstanding foundational pillars of economic resilience: fiscal discipline, central bank independence, private sector dynamism and a vibrant middle class. Externally, China’s growing dominance in global manufacturing—the so-called ‘second China shock’—alongside receding US global leadership and a fraying rules-based global order, has heightened uncertainty. Whether Indonesia can stay the course and navigate changing domestic and global dynamics depends on its policy responses and willingness to take deep structural reform by restoring economic policy credibility, recalibrating the state’s role in development, rebuilding the middle class with a renewed social contract, maintaining sufficient economic buffers and enhancing the quality of policy decision-making and public communication.

Date: 2025
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DOI: 10.1080/00074918.2025.2526824

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Bulletin of Indonesian Economic Studies is currently edited by Firman Witoelar Kartaadipoetra, Arianto Patunru, Robert Sparrow, Sarah Xue Dong and Sean Muir

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