Indonesia’s Prabowo to present high-stakes budget plans as support slips

JAKARTA, Aug 14 (Reuters) – Indonesian President Prabowo Subianto will present his 2027 budget proposals on Friday in the face of falling approval ratings and growing investor scepticism over plans to control commodities exports and other ambitious policies. 

The former special forces commander took office in October 2024 after a sweeping election victory built on promises to root out corruption, lift economic growth from 5% to 8% and give free meals to millions of children.

But his administration has struggled this year with a depreciating rupiah and a poorly performing stock market, as well as concerns over government overspending and central bank independence.

Prabowo’s flagship free meals programme has been hit by budget cuts and allegations of mismanagement.

The president is scheduled to talk about broader policies in a morning address marking Independence Day, then present next year’s budget in the afternoon.

“The 2027 budget is clearly one of the most important credibility checkpoints for global investors in recent years, especially after two consecutive years where the market has had to digest various policy surprises time and again,” Irman Faiz, an economist at Bank Danamon, said.

“What makes this moment different is that the market’s tolerance for policy uncertainty has grown thinner,” he added, noting that Indonesia’s fiscal deficit, around 2.8% of GDP in 2025, is on track to approach the 3% constitutional ceiling again this year.

The last time Prabowo addressed parliament, in May, he dropped a bombshell for international markets, announcing plans to centralise exports of all critical natural resources under a new state-run entity, Danantara Sumberdaya Indonesia.

Many in his administration have since suggested that entity will only have a supervisory role rather than taking control, as was suggested in the original announcement.

But its precise role remains unclear and investors will be hoping the president will provide more clarity, Yose Rizal Damuri, executive director of the Center for Strategic and International Studies think tank, said.

Commodities traders will also be listening closely for any more details on Danantara Sumberdaya Indonesia’s role, a palm oil analyst at a global agriculture trading house said.

Prabowo’s approval ratings tumbled 30 percentage points in eight months to 51%, a poll last month showed. The decline was attributed largely to deteriorating economic conditions and dissatisfaction with law enforcement.

Arya Fernandes, head of politics and social change at CSIS, said Prabowo will need to address doubts over the economy and concerns about the impact of his priority programmes.

“Given the current situation, that is certainly no easy task,” he added.

(Reporting by Jakarta bureau; Writing by Gibran Peshimam; Editing by Andrew Heavens)