Prabowo to Face Nation as Skepticism Grows in Indonesia

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The reality is more complicated.Author of the article:Ben Otto and Chandra Asmara You can save this article by registering for free here. Or sign-in if you have an account.Demonstrators in Jakarta in Aug. 2025. Photo by Dimas Ardian /Photographer: Dimas Ardian/Bloom(Bloomberg) — When Prabowo Subianto takes the stage to address the world’s fourth-most populous nation this week, outwardly he will look more powerful than ever. The reality is more complicated.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe former general, who took office in October 2024, has spent the past year consolidating power in Indonesia. He replaced a technocratic finance minister with one more inclined to his populist thinking, while a long-serving central bank governor left amid tensions over the institution’s independence. Prabowo’s sprawling coalition remains intact, giving him continued control of parliament, and his key initiatives are moving forward.Yet the mood has soured. One recent survey put the president’s approval rating at about 51% — down from more than 80% last year — with half of respondents viewing the economy negatively. Another poll suggested two of his biggest initiatives — a multibillion-dollar free meals program and a sweeping drive to create tens of thousands of cooperatives — are seen as among the country’s least pressing needs.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInvestors are also uneasy. The stock market is among the world’s worst-performing this year — though it has recently risen from its nadir — and the rupiah is near a record low. Two of the three major credit-rating agencies have negative outlooks on Indonesia.Prabowo, 74, is expected to use his State of the Nation address on Friday morning and budget speech in the afternoon to defend his record, double down on his priorities and challenge his critics. “Prabowo will intensify his populist narrative,” said Nicky Fahrizal, a researcher specializing in law and security at the Jakarta-based Centre for Strategic and International Studies. “He will then become defensive, rejecting surveys and public findings by presenting the government’s own data.”Here’s what to watch for Friday.Prabowo can point to better-than-expected growth in the first half of 2026, though it’s nowhere near his goal of 8% by 2029. Poverty is falling and investment is ticking upward. He can underscore strong exports, relatively benign inflation and fuel that has remained cheap and plentiful despite the Iran war’s oil shock.Yet growth has been driven largely by higher state spending, and keeping fuel prices low has required huge subsidies, limiting room for other expenditure. Consumer spending — the main driver of the economy — grew at a slower pace in the second quarter. Surveys show people feel times are tougher.“Markets already understand that growth this time has been driven more heavily by government spending,” said David Sumual, chief economist at PT Bank Central Asia. “Growth cannot rely solely on large government spending or higher taxes, especially when the effectiveness of spending and the risk of leakages remain open questions.”Prabowo has so far kept the budget deficit below the closely watched legal ceiling of 3% of gross domestic product, and analysts expect another target comfortably within that limit. But the numbers will be scrutinized.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Last year, Prabowo based his budget proposal on economic growth of 5.4%, a currency at 16,500 per dollar and higher state revenue. Revenue is set to exceed targets and first-half growth was broadly in line with his full-year goal. But the rupiah is hovering near 18,000, and the deficit is now projected at about 2.85% of GDP — well above the 2.48% first mooted.To be sure, many countries saw spending balloon due to the Iran war. But there’s now limited funding for Prabowo’s other initiatives. S&P Global Ratings expects interest payments to remain above 15% of government revenue through 2027, a potential source of pressure on Indonesia’s sovereign rating.“The exchange rate is the bill for poor policymaking, and this government still refuses to read it,” said Achmad Sukarsono, an analyst with Control Risks.Prabowo on Monday nominated Bank Indonesia Acting Governor Destry Damayanti to lead the central bank following the surprise resignation of her predecessor. Markets now await word of how long her term will be and how the president expects the bank to align with government policy.“Markets fundamentally want the central bank to remain independent,” said Sumual. “Closer coordination would not necessarily be a problem, provided BI’s independence is preserved.”The mass protests that rocked Indonesia a year ago have subsided, though concerns about jobs and inequality remain. Prabowo has brought two prominent labor leaders into his government and kept his big-tent coalition intact. He also appears less reliant on his predecessor, Joko Widodo, with analysts pointing to the apparent sidelining of Vice President Gibran Rakabuming Raka, Widodo’s son.But complaints about the government circulate online, and some regional governments have protested that the diversion of funds toward Prabowo’s priority programs has left them struggling to meet even basic payroll obligations. “I see considerable dissatisfaction among the middle class, and we know that the size and economic position of the middle class have weakened,” said Fahrizal. “There is now a great deal of public protest, but much of it is expressed on social media.”The foundations of Prabowo’s power “are extremely porous,” said Marcus Mietzner, a political scientist at the Australian National University.A year ago, Prabowo highlighted cracking down on graft as a way to drive the economy. Since then, his signature free meals program has been rocked by a graft investigation. There’s also a corruption case against the nation’s top graft prosecutor, who oversaw the president’s drive to seize millions of hectares of resource lands and mining assets.The commodities world, in particular, wants details on Prabowo’s ultimate intentions with Danantara Sumberdaya Indonesia, a new state body designed to manage some of the country’s biggest exports and crack down on underinvoicing and tax evasion. Behind the scenes, a rift has formed over whether the agency will simply monitor exports or dare to become a player.A recurring feature of Prabowo’s speeches is the identification of an enemy. Last year, his foes were largely economic: corrupt officials, greedy businesses, illegal miners and plantation operators, smugglers and the powerful people who protected them. He cast himself as the state standing between ordinary Indonesians and elites siphoning away the nation’s wealth and perpetuating what he called “greedynomics.”Since then, he has increasingly trained that rhetoric on alleged “foreign agents” and domestic critics portrayed as serving outside interests. Recently he turned the same nationalist language on journalists, analysts and NGOs, likening some to Indonesians who once served Dutch colonial rule.Prabowo has also said he’s open to criticism and willing to improve his government. Prabowo is likely to tout progress on signature programs. Danantara, the sovereign wealth fund he created to manage state businesses and invest the country’s wealth, has rapidly expanded its reach, consolidating state enterprises and beginning to invest inside and outside the country. Its track record is unproven, and investors await the fund’s first financial reports.Free meals remain close to Prabowo’s heart, and the program was relatively popular before the graft scandal. Its budget — approved at $21 billion this year before being cut to $13 billion — will be in focus. He’s also likely to make the case for continuing to build thousands of cooperatives despite concerns over their viability.Analysts will parse the speeches for Prabowo’s plans, including any details about a new financial hub, signs he intends to take on politically difficult fuel-subsidy reform or a revival of his push to end direct elections for regional leaders.Prabowo has repeatedly argued that governors, mayors and regents should be chosen by local legislatures rather than directly by voters, principally on cost grounds. “His economic vision, including value-added industrialization, food and energy security, and a stronger role for the state, is likely to remain intact,” said Dedi Dinarto, associate director at strategic advisory firm FGS Global. “Any recalibration will be less about changing course than refining implementation and correcting areas where execution has fallen short.”—With assistance from Claire Jiao.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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