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

Indonesian President Prabowo Subianto is set to unveil his 2027 budget proposals on Friday, despite a decline in his approval rating and increasing skepticism from investors. The former special forces commander assumed office in October 2024, vowing to combat corruption, boost economic growth, and provide free meals to children. However, his administration has faced challenges, including a weakening rupiah, a struggling stock market, and allegations of overspending and mismanagement within the central bank.

A flagship program of Prabowo's administration, the free meals initiative, has been affected by budget cuts and accusations of mismanagement. The president is expected to discuss broader policies during Independence Day celebrations in the morning, followed by the presentation of the 2027 budget in the afternoon.

Irman Faiz, an economist at Bank Danamon, emphasized that the 2027 budget is a crucial credibility check for global investors, especially after the market had to absorb several policy surprises within the past two years. The market's tolerance for policy uncertainty is dwindling, according to Faiz.

The fiscal deficit, which stood at around 2.8% of GDP in 2025, is expected to approach the 3% constitutional ceiling once more this year. Prabowo's approach to centralizing the export of critical natural resources under a new state-run entity, Danantara Sumberdaya Indonesia, has raised concerns among investors. The precise role of this entity remains uncertain, with some suggesting it may only have a supervisory role rather than a controlling one.

Commodities traders will closely monitor any additional details on the role of Danantara Sumberdaya Indonesia, particularly as it pertains to palm oil. Prabowo's approval ratings have plummeted by 30 percentage points over the past eight months, falling to 51%, a poll revealed. This decline was primarily attributed to deteriorating economic conditions and dissatisfaction with law enforcement.

To address these concerns, Arya Fernandes, head of politics and social change at the Center for Strategic and International Studies think tank, stated that Prabowo will need to tackle doubts about the economy and the potential impact of his priority programs.