Prabowo's Populist Policies Aim to Boost Indonesian Economy

Indonesian President Prabowo Subianto's early policy decisions have centered on populist measures to stimulate consumer spending and drive economic growth.

Populist Initiatives

Prabowo's initiatives include:

* Scrapping restrictions on subsidized cooking gas distribution
* Reducing a planned tax hike
* Expanding a free meal program
* Raising the minimum wage by 6.5%

Popularity and Economic Outlook

These moves have boosted Prabowo's popularity, with his approval rating reaching 81%. However, analysts question the sustainability of such policies over the long term.

Market Impact

Prabowo's policies have raised concerns among investors, leading to a decline in Indonesian stocks and currency. Foreign outflows have been triggered by fears of lower economic growth and decreased corporate earnings.

Budgetary Constraints

Indonesia's budget deficit cap limits the scope of Prabowo's spending. The expanded food program will add 0.7 percentage points to growth but increase state funds by $6 billion. The scaled-back tax hike could cost $4.6 billion in revenue.

Fiscal Prudence

Prabowo has pledged to adhere to the budget deficit limit despite ambitious spending plans. The outcome of his order to cut $19 billion in planned spending remains uncertain. Experts warn that populist spending may overshadow fiscal prudence.

Economic Stimuli

Prabowo's policies aim to boost economic activity amid weak domestic demand. Household consumption, a key driver of growth, has slowed below 5% for five consecutive quarters.

Export Challenges

Ongoing US trade tariffs and weak purchasing power pose challenges for Indonesia's export outlook. Analysts believe Prabowo's pro-growth measures will take time to impact consumption.

Structural Issues

Economists emphasize that structural reforms are necessary to address deeper economic challenges, such as employment and investment conditions.