BY: PERDANA WAHYU SANTOSA
Discussions emerging in think tank corridors and even in Jakarta coffee shops have recently raised concerns about whether Indonesia is heading toward chaos. The dominant narrative tends to emphasize a gradual erosion of trust and institutional legitimacy, which has long served as the backbone of our economic stability.
However, as an academic accustomed to observing the dialectics of development, I see the turbulence expected between 2026 and 2028 not as a sign of collapse, but as a “promotion exam” for a nation transitioning toward a more courageous economic model.
We must acknowledge that our stability anchor is shifting. For two decades, fiscal discipline with a deficit ceiling of 3 percent of GDP has been the ultimate tool for maintaining global confidence and preserving investment-grade ratings.
When in February and March 2026 Moody’s and Fitch revised Indonesia’s sovereign rating outlook to negative, markets reacted to what they described as reduced policy predictability. However, this shift in predictability is in fact a logical consequence of a paradigm change—from mere “defensive management” to “aggressive development-building.”
In the 2026 State Budget (APBN), the government designed a fiscal deficit of 2.68 percent of GDP, which—although close to the legal threshold—still reflects compliance with the regulatory corridor. Attention has largely focused on the Free Nutritious Meal Program (MBG), which absorbs IDR 300–330 trillion.
Critics view this as a fiscal burden, but from a development economics perspective, it is a direct investment in human capital aimed at breaking the poverty chain and increasing future productivity in order to pursue an 8 percent annual growth target. It is true that Indonesia’s tax-to-GDP ratio remains among the lowest in comparable countries, but this fiscal pressure should instead become a catalyst for more radical and credible tax reform.
On the monetary side, pressure on the rupiah, which at one point exceeded IDR 17,000 per US dollar, triggered collective memories of the 1998 crisis. Market concerns were further amplified by the nomination of a relative of President Prabowo as Deputy Governor of Bank Indonesia, seen by some as a threat to central bank independence.
However, stability in the modern era does not rely solely on institutional isolation, but also on closer policy synchronization to address global trade tensions. Market perceptions of independence are important, but policy effectiveness in maintaining inflation and middle-class purchasing power will ultimately be a more concrete measure than concerns over personnel appointments.
The new, more centralized power structure—including the formation of bodies such as Danantara and the involvement of the military in civilian posts—is often seen as a regression from Reform-era norms. Institutions such as the Lowy Institute and East Asia Forum have warned of a return to New Order-like tendencies.
However, in an uncertain geopolitical environment, stronger central coordination may be necessary to execute strategic projects that have long been hindered by bureaucratic fragmentation. What is needed now is not fear of populism, but assurance that every policy is implemented with sufficient safeguards to prevent systemic vulnerabilities.
We cannot ignore that the debt service ratio has exceeded 40 percent and interest payments are approaching 20 percent of state revenue. These figures are highly challenging as they reduce fiscal space for basic infrastructure development. Yet history shows that Indonesia is not an easy country to bring down; we have survived the pandemic and commodity shocks with remarkable resilience. Our democratic roots, though currently tested by political maneuvers, remain an unbroken foundation.
Predictions of gradual deterioration and potential technical recession in the second half of 2026 should be treated as an early warning signal—a dress rehearsal for reform. If the government responds with consistent regulatory reform and non-discriminatory law enforcement, then the turbulence of 2026–2027 will not become a crisis, but rather a stepping stone toward stronger economic sovereignty. True chaos will only occur if we become complacent and lose confidence in our own capacity to change.
This article is an academic opinion based on data from the IMF, World Bank, Lowy Institute, East Asia Forum, FULCRUM-ISEAS, Moody’s, and Fitch, and has been published on RMOL.ID.
The author is Professor of Economics, Dean of the Faculty of Economics and Business, YARSI University, Director of Research at GREAT Institute, and CEO of SAN Scientific.
