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Prabowo’s Indonesia: a checklist for Asia CEOs May 4, 2026 What’s new: Indonesia’s President Prabowo Subianto is steering the economy in a new direction towards more populist, debt-backed social programmes. Global capital gatekeepers have been raising the alarm — in ways not seen for decades — warning that the economy is heading into fiscally dangerous waters. Fitch and Moody’s have put negative warnings on their ratings. And MSCI said that unless the stock market is cleaned up they’d remove Indonesia from the emerging markets index. So, three big warnings. In 25 years of covering Indonesia — not since the 1997 Asia Financial Crisis — have I seen such serious warnings handed out to this country. As a result, Indonesia’s growth rate targets have been recalibrated downwards. In April, the World Bank also lowered its rate from 4.8% to 4.7%. Recently, IMA Asia nearly halved its initial growth forecast for 2026. Indonesia is caught between poor domestic policy settings by President Prabowo’s government, which undermine growth and reduce resilience, and a surge in energy costs, which will hurt consumers. Our GDP forecast drops to 2.6% growth in 2026 (prior 4.6%) and 3.5% in 2027 (prior 4.4%). The gap between these two reflects, in part, a disagreement about how much damage domestic policy choices and the external energy shock will inflict. Here is how one policy expert sees it. 2026 is the first year in which the budget is fully Prabowo’s rather than inherited from the former president, Jokowi (Joko Widodo). This year will reveal whether political ambitions can be financed without undermining fiscal credibility. There are three tests to watch. First, whether the government can fund its expensive flagship programs while debt service and spending are already high. Second, whether market confidence can be preserved amid concerns over policy predictability. And third, can the external shocks, such as inflation from the war, be managed without turning fiscal strain into a governance problem? Why it matters: Asia CEOs must adapt to the new policy environment to succeed. Investing in Indonesia offers considerable rewards, even if the risks and costs of doing business have risen.   Indonesia’s US$1.47 trillion economy is hard to ignore; it accounts for nearly 40% of ASEAN’s economy. Foreign firms will need to align their value propositions with increasingly nationalistic priorities to capture the most upside. Indonesia’s model is shifting. The question is not how fast Indonesia can grow, but what kind of growth is being built and who benefits from it. The fiscal constraints, declining middle class and state-directed policy are signals that the economy is rebalancing its trajectory, which creates both opportunity and uncertainty. Reality check: Political imperatives have become more important than balanced budgets. A full policy about-face or a return to the way things were is unlikely. There is limited room for a full reversal. Prabowo’s flagship programs are politically central to his presidency. Prabowo associates himself with his social programmes, especially the free nutritious school meal. Scaling them back sharply would carry a high cost. Yet, the government has shown a willingness to heed warnings. They made course corrections with the stock market, after all. The more realistic scenario is adjustment at the margins, such as improving communications to boost market confidence. The authorities moved on capital market reforms following the MSCI warning, including new measures to improve ownership transparency. There are opportunities, but uncertainty around execution and policy consistency will persist. Zoom out: Many Asia CEOs have experience with a similar state-first market — China — and can bring that to bear. Opportunities exist for firms attuned to the government’s priorities. Indonesia will reward firms that align with its direction in industrial development, job creation, and long-term capability building. Indonesia will continue to grow, albeit slowly. The quality, inclusiveness, and sustainability of that growth will depend on how well the government manages the trade-offs it is now facing. This is the story to watch in 2026. An endorsement: An Asia CEO at an Australian firm, with a long history in Indonesia, remains optimistic about their business even as infrastructure projects are delayed. The market is very good in Indonesia, and we are very positive about our prospects. It is not so much the infrastructure spend, which has dropped off, but what follows it. The enablement of economic activity is important to us. Our products are driven by the construction market for industrial and commercial buildings. We see very strong prospects for this market in local business growth. We are improving relations with our suppliers and customers.   Asia CEO Checklist: three clarifying questions for a sharper Indonesia strategy   1. Does your firm’s competitive advantage align with Indonesia’s ‘national upgrading’ policy push, or does it rely on exports?   Get in line: Contributing to economic growth is no longer sufficient to stay in the government’s good graces. Foreign firms are expected to contribute to nation-building objectives. Raw commodity exports are increasingly discouraged in favour of downstream processing. The government views industrial policy as a tool for national upgrading. Not just export growth. Prabowo has repeatedly mentioned ‘down-streaming’. Indonesia should no longer export raw materials if it can process them domestically to capture more value, create more jobs, and gain greater strategic leverage. Firms aligned with state priorities on local processing in strategic sectors will benefit. For example, copper, bauxite, and nickel are the most commonly cited examples in Prabowo’s downstream push 2. Is your firm positioned as a trusted strategic partner, or does it operate on a transactional basis?   Partners wanted: Foreign firms should seek to become value-added partners, especially if they can bring advanced financial and management approaches that Indonesian companies lack. The implication for foreign investors is clear. Success in Indonesia’s infrastructure sector depends less on being a contractor and more on being a strategic partner able to share risk and connect infrastructure to broader economic outcomes. Constructing tangible infrastructure is no longer the priority… Pak Jokowi’s administration created a substantial asset base. So, the current focus is on completing, operationalising, and connecting