A rout in Indonesia

A stock-market plunge has amplified investor concerns about President Prabowo's policies.

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Welcome to Balance of Power, bringing you the latest in global politics. If you haven't yet, sign up here. Prabowo Subianto beamed confidence in a speech to the Davos crowd last week. The Indonesian president predicted a boom year for his country, noting the IMF had recently hailed the South East Asian nation as "a global bright spot." Fast-forward a few days, and the situation seemed — in IMF speak — tilted to the downside, to put it mildly. Global index compiler MSCI warned of "fundamental investability issues" in the Indonesian stock market, triggering one of the worst selloffs since the 1998 Asian Financial Crisis. While the market issue predated Prabowo, the rout rattled investors already preoccupied with serious concerns that have emerged since he took power in October 2024. The former general, and protégé of ousted dictator Suharto, has pursued policies to rapidly expand Indonesia's economy, improve the living standards of its nearly 300 million citizens and recover national wealth he says has been squandered by elites and resource firms. What many investors see, however, is a dismantling of guardrails and a hollowing out of institutions painstakingly set in place after the 1998 meltdown. They were already troubled by Prabowo's move this month to shoehorn his nephew into the top leadership of Bank Indonesia, raising further concerns over monetary-policy independence at the central bank. The fiscal deficit surged to its widest in at least two decades last year — excluding the pandemic — as Prabowo pursued social-spending priorities. That was partly possible after he ousted internationally respected economist Sri Mulyani Indrawati as finance minister following deadly Gen-Z protests. Indrawati was removed in September. 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