Nation Thailand
Indonesia faces market confidence test as assets tumble
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Indonesia is facing one of its toughest market-confidence tests in years, as investors sell off the country’s stocks, bonds and currency amid growing concern over fiscal discipline, political interference and the future direction of economic policy.
Key facts
- Indonesia’s 2025 budget deficit stands at 2.92% of gross domestic product, still just below the legal ceiling of 3%
- The Jakarta stock market has fallen by more than 36% from its peak, making it one of the worst-performing major markets globally, while the rupiah has weakened beyond 18,000 to the US dollar.
- In financial markets, one of the clearest warning signs is not merely a falling stock market or a weaker currency
- Supporters argue that such policies may be necessary if Indonesia is to escape the middle-income trap and push economic growth towards the government’s 8% target.
- Prabowo wanted to accelerate the programme as a political priority, while Sri Mulyani insisted on preserving the legal deficit ceiling of 3%
- Foreign holdings of Indonesian government bonds have also dropped by about 86 trillion rupiah since August 2025, raising the question of whether Southeast Asia’s former market darling is now facing a broader crisis of confidence.
Summary
In financial markets, one of the clearest warning signs is not merely a falling stock market or a weaker currency. It is when several asset classes come under pressure at the same time and that is now happening in Indonesia.
Over recent months, foreign investors have steadily reduced their exposure to Indonesian assets, from equities and government bonds to the rupiah.