INDONESIA: Political uncertainty challenges Indonesia's growth path The market is accelerating risk assessments.

Political uncertainty is challenging Indonesia's economic momentum. Meanwhile, investors assess risks and new growth prospects.

According to EBC Financial Group, Indonesia's GDP growth of 5.12% is facing pressure from unrest, and investors remain cautious.

INDONESIA, September 25, 2025 /EINPresswire.com/ -- Indonesia's economy expanded by 5.12% in the second quarter compared to the previous year. Reinforcing its important role as a growth engine in Southeast Asia However, political tensions in the country since the massive protests Recession in investor confidence, as well as pressure on the rupiah, have raised concerns about the stability and confidence in Southeast Asia's largest economy.

The rupiah weakened to around 16,500 rupiah per US dollar, while the Jakarta stock index

fell more than 3% and the 10-year government bond yield rose to 6.335%, reflecting investors' need for higher returns to hold Indonesian assets. Although the Indonesian authorities, including Mr. Erlanka Hartarto, The Prime Minister and the Central Bank of Indonesia reiterated that the economic fundamentals remain strong, but the dismissal of Sri Mulyani Indravati as finance minister and the violence during the protests continue to weigh on market sentiment.

Samuel Hirtz, Head of Asia Pacific at EBC Financial Group, commented, "Indonesia's long-term growth structure remains strong, driven by a favourable demographic structure. The acceleration of digital transformation and its strategic position in the global commodity market are all considered to be the cornerstones of future market growth and development."

He added, "However, the current market situation reflects the complexity between macro factors and investor confidence dynamics. In a state of high uncertainty. Market participants often choose to avoid risk, which can cause temporary discrepancies between asset value and real economic fundamentals."

Strong fundamentals continue to support Indonesia's economy.

Mr. Erlanka Hartarto Indonesia's main economy minister reiterated the country's stable growth potential. He pointed out that domestic demand, infrastructure investment, and commodity exports remain key drivers of the economy. Meanwhile, Analysts at the East Asia Forum see the recent protests as a "warning sign" that reflects the need to balance economic growth with strengthening governance.

According to analysts at EBC Financial Group, investors are withdrawing from Indonesian assets due to rising political risk premiums amid the leadership transition, especially in the case of the resignation of Sri Mulyani. The former finance minister further reinforced the concern about the continuity of the policy. The sell-off reflects investors' risk management in a risk-averse global market, rather than a sign of weakness in Indonesia's economic fundamentals.

Economic turbulence goes beyond financial markets.

The social unrest that erupted across Indonesia began to affect the real economy, with the Retailers Association revealing damages worth more than 500 billion rupiah (about US$30.4 million). The turbulence of digital commerce has significantly impacted small businesses across the country.

The suspension of the TikTok Live sales feature has exacerbated the impact on SMEs who rely on social commerce platforms to generate revenue. These platforms have become a major revenue stream in recent years, giving SMEs access to a user base of more than 185 million across the country.

Samuel Hirtz, Head of Asia Pacific at EBC Financial Group, said: "Social stability is an often underestimated factor in emerging market valuations. Meanwhile, the retail and luxury goods sectors are facing immediate earnings pressures, although overall macro factors remain strong."

However, According to EBC analysts, the unrest reflects the fragility of a consumption-driven economy. Although macroeconomic indicators can still support the shock in the short term, if the tension persists, investors in consumer stocks may turn to defensive strategies and readjust their portfolios in the Indonesian stock market.

The policy response is being closely watched.

Market participants are watching the Indonesian government's decisive stance in the coming days. Restoring confidence will depend on the speed of resolving political and security problems. President Prabowo and his working group pledged to take measures to restore calm and address public discontent. This includes a review of the prerogatives of the legislative branch. The suppression of unrest and the injection of 200 trillion rupiah (about US$12.1 billion) into the economy remains to be seen.

Indonesia's central bank has signaled its readiness to intervene to stabilize the market through interventions and liquidity measures to reassure investors that volatility will be under control.

For Global Investors The turbulence in Indonesia reflects broader dynamics in emerging markets, where political, policy credibility and governance factors weigh as much as economic growth figures.

Samuel Hertz, Head of Asia Pacific at EBC Financial Group, commented, "While Indonesia's GDP remains strong, political uncertainty can quickly change the risk climate and investment decisions. Market sentiment does not depend solely on economic factors. However, social and political stability are also important factors that determine the direction of investment in emerging markets."

Disclaimer: This article reflects the views of EBC Financial Group and its global entities only. It is not financial or investment advice. Trading commodities and foreign exchange (FX) carries a high level of risk, resulting in the loss of all or more of your initial investment. EBC Financial Group and its related entities are not responsible for any damages caused by referencing this information.

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