INDONESIA’S ECONOMIC DIRECTION UNDER PRABOWO

By KUSNANDAR & CO., Attorneys at Law – Jakarta, INDONESIA

 

President Prabowo Subianto’s administration has placed ambitious economic growth targets at the center of its national development agenda. The government aims to achieve annual GDP growth of around 8%, a goal that will require a combination of increased productivity, effective resource management, infrastructure development, and inclusive wealth distribution. A series of policies has been introduced to align with this vision and to reinforce macroeconomic stability while attracting both domestic and foreign investment.
 
One of the government’s first major economic moves was to regulate foreign exchange earnings from natural resource exports (DHE SDA). Under Government Regulation No. 8/2025, exporters in key sectors—mining (excluding oil and gas), plantation, forestry, and fisheries—are required to place 100% of their export proceeds in special foreign exchange accounts at domestic banks for a minimum of 12 months. This policy is intended to bolster foreign reserves and support the stability of the rupiah.
 
In line with a people-centered economy, the administration is also promoting rural economic empowerment through initiatives such as the "Red-and-White Village Cooperatives," designed to improve access to basic goods, create local jobs, and reduce regional disparities. Infrastructure remains a national priority, with large-scale investments planned in logistics networks, inter-island connectivity, and strategic national projects. These infrastructure efforts are expected to serve as the foundation for food self-sufficiency, energy independence, and downstream industrialization.
 
The government has also introduced short-term economic stimulus measures to boost consumer spending, including wage policy adjustments, social assistance, holiday bonuses (THR), discounted transportation during national holidays, and price stabilization programs for basic necessities. To enhance long-term investment capacity, the administration is restructuring state-owned enterprises (SOEs) and has launched Danantara (Daya Anagata Nusantara), a sovereign wealth fund-style entity designed to consolidate strategic assets and drive capital toward high-value sectors.
 
President Prabowo has also emphasized his commitment to a “Pancasila-based economic model”—a mixed economy where the state plays both a regulatory and participatory role. This approach prioritizes national interests in managing natural resources and aims to ensure that the benefits of growth are shared equitably. The government seeks to be more than just a facilitator; it aims to act as a strategic actor in critical sectors to protect public welfare and national sovereignty.
 
Fiscal prudence and macroeconomic stability are also at the forefront of policy. While stimulus programs require substantial funding, the government is working to keep the budget deficit within legal limits through improved tax collection, spending efficiency, and greater fiscal discipline. This balancing act—stimulating growth while maintaining stability—remains one of the administration’s key challenges.
 
Nonetheless, several issues may hamper the implementation of Prabowo’s economic agenda. First, some observers note a lack of policy cohesion and strategic clarity in the early stages of the new administration, which has led to uncertainty among market participants. Second, the export proceeds regulation, while supportive of foreign reserves, may impact capital flows and raise concerns among exporters and investors. Third, the budgetary impact of social programs could strain fiscal resources if not accompanied by revenue growth. Lastly, global economic factors—commodity price volatility, US interest rate shifts, and China’s economic slowdown—could undermine domestic policy effectiveness.
 
Overall, Prabowo’s economic policy direction combines immediate social welfare measures with long-term goals of industrialization, human capital development, and strategic resource utilization. Its success will depend heavily on implementation consistency, inter-ministerial coordination, regulatory clarity, and the government’s ability to maintain macroeconomic discipline while accelerating inclusive growth. For investors and businesses, understanding this evolving policy landscape is crucial in navigating opportunities, managing risks, and aligning strategies with national priorities.

K&Co - September 16, 2025