Presiden Prabowo Subianto recently faced warnings regarding a potential decline in the Composite Stock Price Index (IHSG), following the announcement of his Free Nutritious Eating (MBG) policy. Yesterday, IHSG experienced a significant drop to 7%, reaching Rp6,084, marking its lowest point since the Covid-19 pandemic. Morgan Stanley also downgraded Indonesia’s investment rating due to fiscal challenges and currency depreciation concerns ahead of the 2024-2029 presidency. Despite these economic indicators, Prabowo remains unfazed, emphasizing that not all citizens are affected by stock market fluctuations.

Fiscal Challenges Under Prabowo's Leadership

Prabowo's administration faces mounting fiscal pressures as highlighted by Morgan Stanley. The reduction in investment ratings stems from uncertainties surrounding future fiscal policies and burdensome campaign promises like free lunches for students. These initiatives are perceived as straining national finances amidst already declining tax revenues.

The financial landscape under Prabowo has encountered several obstacles. Morgan Stanley pointed out that the president-elect's programs could impose heavy fiscal burdens, especially given the weakening prospects of Indonesian income. The country is grappling with an APBN deficit reaching Rp31.2 trillion or 0.13% of GDP by late February 2025. Tax collection has contracted by 30% compared to the same period last year, exacerbating the situation. This contraction reflects a slowing domestic economy marked by reduced business activities, further complicating the government's fiscal strategy. The MBG program, while ambitious, consumes only a fraction of its allocated budget, suggesting either mismanagement or underestimated costs.

Economic Indicators Reflecting Public Consumption Trends

Beyond fiscal policy, broader economic indicators signal a decline in public purchasing power. Analysts note a significant weakening in middle-class spending, contributing to the overall slump in the stock market. Deflation rates have reached their worst levels in over two decades, indicating a severe dip in consumer demand.

Data reveals surprising trends in import patterns, particularly concerning consumer goods. Historically, imports increase before Ramadan due to heightened demand, yet this year witnessed a 21.05% year-on-year decrease in consumer imports. Experts attribute this anomaly to diminished public purchasing power, leading to lower demands even for essential items. Bhima Yudhistira, Director of the Center of Economic and Law Studies, confirmed that the deflation in food prices (-0.7% month-to-month) aligns with weakened consumer demand. Notably, this trend contradicts historical patterns where pre-Ramadan imports typically surge. Additionally, Mandiri Spending Index data indicates a slowdown in consumer spending just weeks before Ramadan, marking another unprecedented shift. Such anomalies underscore the pressing need for policies aimed at revitalizing consumer confidence and expenditure.