Indonesia: Protests maintain the government under pressure to improve socioeconomic conditions

Event

Indonesia continues to face protests and unrest, though at a lower scale. In the end of August and in early September, violent mass protests and attacks against official buildings and public infrastructures took place across many cities, leading to persisting tensions despite an increased military presence and the government’s decision to cancel the allocation of controversial housing allowances granted to lawmakers.

Impact

The latest protests in Jakarta, notably about working conditions, testify that the momentum is on protesters’ side and that further protests are likely to demand real changes on various issues. This is particularly true as the youth represents a large share of the population. The cost of living, elite privileges and perceived corruption, the lack of job opportunities and rising youth unemployment are among the most vocal issues, echoing similar grievances in other Asian countries (e.g. the recent protests in Nepal, Timor-Leste and the Philippines). Discontent, which already started in 2024, takes place in a deteriorating socioeconomic climate, characterised by slowing economic activity (expected at +4.8% in 2025-2026), rising factory layoffs, widened wealth inequalities and a narrowing middle-class. The fact that high economic resilience (at least +5% GDP growth in 2010-2019 and in 2022-2024) did not translate into improved living standards for the majority of the population fuels anger against the elite. Moreover, the economic outlook could be more challenging amid higher US tariffs and shifting supply chains, weakening consumption, overproduction in the nickel industry and a domestic manufacturing industry struggling against competition from China and other neighbouring countries. Rising automation also hits the manufacturing sector and employment.   

Since his election last year, President Prabowo has been criticised. First, his costly plan to provide free meals to schoolchildren and the launch of the Danantara sovereign wealth fund have left less money available for health and education and motivated compensating tax increases to keep the fiscal deficit under 3% of GDP and stabilise public debt. Secondly, his attempt to give a more important role to the army within civil institutions and to stick to a firm security response to quell protests and restore order has also drawn public criticism. This approach to structural grievances, if it persists, risks provoking an escalation of the population’s anger and triggering a cycle of anti-government unrest and sharp repression in the coming year. This instability is harming the economy and investor perception about a usually safe economic haven, distrusting Prabowo’s commitment to an elusive 8% GDP growth in the future. Since the start of Prabowo’s presidency in October 2024, the rupiah has depreciated by 7.5% against the declining US dollar, evidencing rising uncertainty about Indonesia’s future growth trajectory. In this context, a downgrade of the ST political risk rating (2/7) and the business environment risk rating (D/G) is not to be ruled out in the short term.

Analyst: Raphaël Cecchi – r.cecchi@credendo.com