Indonesian Markets Face Pressure from Policy and Rupiah
President Prabowo Subianto's populist agenda and new mandates for the central bank have triggered a confidence crisis among foreign investors. The rupiah has reached a record low of 18,190 per dollar while credit default swaps signal a potential loss of the country's investment-grade rating.
President Prabowo Subianto is losing investor trust as populist spending and unorthodox policy shifts trigger a "doom-loop" in Indonesia markets. The national stock market has fallen more than 42% in 2026, making it the world’s weakest performer. Investors fear that eroding fiscal discipline and central bank interference will permanently damage the country's investment-grade status.
### Fiscal Expansion Meets Currency Crisis The rupiah fell to a record low of 18,190 per United States dollar after dropping 8% this year. Despite a 50-basis-point rate hike in May and a $12 billion reduction in foreign exchange reserves, the currency continues to weaken. Pictet Asset Management investment manager Tan Altundag said the slide risks becoming a self-reinforcing loop that pushes up inflation and weighs on growth.
