Arya News - Two years into Prabowo Subianto’s presidency, the economy is showing respectable growth and contained inflation despite global pressure, but many Indonesians say they struggle to secure higher incomes or better jobs.
JAKARTA – Two years into Prabowo Subianto’s presidency, the economy has proven resilient and even accelerated under global pressure, but many Indonesians struggle to secure stable incomes or better jobs, while the rupiah’s depreciation and a dramatic stock market decline reflect a lack of investor confidence.
Prabowo assumed office in late 2024, and under his leadership Indonesia’s gross domestic product expanded by 5.11 percent in 2025 and by 5.45 percent in this year’s first half, well above the 5 percent rate the country had become accustomed to since 2013.
The acceleration in GDP growth was “commendable given the challenging external environment,” Economist Intelligence Unit (EIU) analyst Qi Hang Tay told The Jakarta Post on Monday.
Prabowo’s two years in office were dogged by continuous global turbulence, beginning with last year’s tariff threats from the United States that hurt Indonesian exports and this year’s Iran war that pushed up global oil prices and hence Indonesia’s energy import costs.
“However, whether [the higher GDP growth] counts as an ‘achievement’ is debatable. While the administration has maintained macroeconomic stability, this largely reflects a continuation of existing trends rather than a significant structural breakthrough or a new phase of accelerated growth,” Tay said.
The growth had not translated into “sufficiently strong improvements” in household incomes and employment opportunities, Tay explained.
“Many Indonesians continue to face difficulties securing well-paying jobs, particularly in the formal sector, while wage growth has struggled to keep pace with their expectations,” elaborated the analyst.
He said there was a “disconnect” between the macroeconomic data and people’s daily reality, whereby economic output could continue expanding at a healthy pace even as many households struggle with stagnant purchasing power and limited upward mobility.
The worsening sentiment is captured in Bank Indonesia’s (BI) consumer confidence survey, which has been on a declining trend since early this year, mainly because respondents have become less upbeat on employment.
“Perceptions of the economy are heavily influenced by the cost of essential goods and the stability of the labor market, where the current performance has been less impressive than the top-level macroeconomic figures suggest,” said Tay.
While government spending on strategic initiatives like the free meals program did support growth, it failed to remove the disconnect, since it did not “necessarily translate immediately into stronger household purchasing power or consumer sentiment”, he argued.
Mohammad Faisal, executive director of Jakarta-based think tank Center of Reform on Economics (CORE), said in a press briefing on Thursday that GDP growth was propped up by upper-class consumption.
Spending by the much larger number of less affluent but not poor households, which makes up the biggest chunk of household spending, “hasn’t recovered” from the COVID-19 pandemic, he said, adding that the government only intervened to help the poor, while “overlooking” the middle class.
Prabowo’s most ambitious campaign promise is attaining 8 percent GDP growth before his term is up, which Nobel laureate James Robinson recently highlighted was historically a tough ask.
Faisal highlighted that the government had now “toned down” statements on the ambitious goal and shifted toward “so long as it’s heading there”.
He pointed out that investment, a key component for achieving higher growth, was growing under Prabowo but noted that it was almost exclusively carried by state spending, much of it through state-owned enterprises.
Growth in capital expenditure by private enterprises was almost stagnant, said Faisal, with the private sector contributing “very little” to the overall GDP expansion.
The Indonesia Stock Exchange Composite index has plummeted over 40 percent in 2026, making it the world’s worst-performing stock market, largely as a result of multiple selling bouts triggered by index provider MSCI’s warnings over domestic market transparency that drove out foreign capital.
Compounding the market turmoil, the rupiah has suffered severe volatility this year, plunging to new depths against the US dollar as it breached the psychological 18,000 threshold to an all-time low eclipsing that of the late-1990s Asian Financial Crisis.
Permata Bank chief economist Josua Pardede told the Post on Monday that the rupiah’s depreciation pushed up cost of funds and MSCI’s warnings meant Indonesia was facing “serious threats” to investor confidence.
He said there was a disparity between the country’s GDP growth and what people felt, since the increase in government spending and investment did not necessarily bring “equitable prosperity”.
Josua went on to say that the effectiveness of key government initiatives like the free meals program and the Red and White cooperatives in driving private investment and job creation “still needed calculable evidence”.
Rahma Gafmi, an economics professor at Airlangga University, concurred that there was a disparity between the strong economic data and people’s daily lives, which she argued was due to a big portion of the growth being concentrated in capital-intensive investments.
“That’s why [people] are feeling left out”, she told the Post on Monday, pointing out that “the ease of getting a proper job and secure income” was the “most real gauge of prosperity”.
Despite skyrocketing global oil prices, the Prabowo administration has kept domestic inflation within the central bank’s target range, thanks in part to continued energy subsidies. Yet, many households struggle to make ends meet.
Rahma said the majority spent the largest chunk of their incomes on food, making them more exposed to price increases even if overall inflation was maintained at a healthy level.
BI Governor Destry Damayanti said in a press conference on Monday that “what warrants attention” was volatile food inflation that currently sits at 5 percent. She said BI and the government were looking to bring it down to between 1.5 to 3.5 percent.