15/06/2026

BIZ & FINANCE MONDAY | JUNE 15, 2026

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Indonesia struggles to win back investors o Stock market has lost about a third of its value since the start of the year

JAKARTA: Indonesia’s economy faces a perfect storm wrought by high energy prices, and while the currency has rebounded slightly, critics warn government policies are unnerving investors at a critical moment. Southeast Asia’s biggest economy, a net oil importer, was hit hard by the global surge in crude prices fuelled by the Middle East war. To shield its citizens, the government has insisted on maintaining a costly subsidy on fuel and a multi-billion-dollar school meal programme criticised for being wasteful as well as causing mass food poisoning. At a time when Indonesia desperately needs foreign currency, authorities spooked investors with tighter export controls lambasted as “resource nationalism”, while a move by parliament to tighten oversight of the central bank raised fears for its independence. The rupiah has plummeted, hitting successive record lows and dropping below 18,100 to the dollar this week. The stock market has lost about a third of its value since the start of the year – one of the worst performances globally – as traders increasingly “sell Indonesia”. This week, there was finally some reprieve as the currency and markets reacted positively to the central bank raising its base lending rate by 75 points in back-to-back hikes. However, “investor concerns over recent domestic policy moves will persist”, said an analysis by BMI, a unit of Fitch Solutions. It pointed out the rupiah was still about seven percent weaker than at the start of the war in February. “Given that investor concern over domestic policy has not been resolved, we expect depreciatory pressure on the rupiah to persist,” BMI said. This, in turn, would force Bank Indonesia “to hike rates further”, it added. High lending rates tend to dampen economic growth. President Prabowo Subianto’s government is chasing a growth target of eight per cent by 2029 as one of its major policy objectives – an ambitious goal some experts warn would be hard to reach. Deputy Finance Minister Juda Agung told AFP this week the government would not abandon its target despite the high social spending that underpins it. “We have to grow higher to become a rich country by 2045,” he said in an interview. “Otherwise we are ... going to be trapped in the middle-income countries” group. Juda, a former central bank deputy governor, said the government supported the recent interest rate hikes despite the potential risk to growth as well as higher debt servicing costs for the state. “This is the area of the central bank. They are independent. They know what they should do,” he said. Interest rate hikes alone may not be enough to prop up the rupiah, experts say. “Placing the currency on a firmer footing requires ... the Prabowo administration to shift away from its populist and interventionist policy agenda,” Capital Economics said in a note this week.

Police officers push back a barricade as university students protest against a steep rise in non-subsidised fuel prices and the government’s budget waste, urging authorities to halt the free school meals programme, in Jakarta. – AFPPIC

market risk status after the group expressed concerns about the transparency of stock ownership. A downgrade could trigger more capital flight. According to Juda, there have been “big inflows on the government bond” since the interest rate rose, as well as “signs of confidence in the stock market”. The World Bank said last Thursday Indonesia would likely see growth of no more than 5 per cent under the strains of high public spending – lower than the government’s target

“Ultimately what’s needed is a clear shift ... towards more investor-friendly policymaking.” Juda insisted the rupiah was undervalued and that economic pressures were “manageable” and will abate once the war ends. “Our economy is quite resilient,” he said. Economists expect further interest rate hikes, spelling potential trouble for the government’s budget deficit, which it is required by law to keep at no more than three per cent of GDP. Adding to the uncertainty, Jakarta is awaiting a decision by global index compiler MSCI on its

of 5.4 per cent. In the first quarter of 2026, official data put growth at 5.6 per cent, but analysts have expressed doubts about the reliability of the figures. Deni Friawan, a researcher at the Jakarta-based Centre for Strategic and International Studies, said the government should cut spending to show investors it is committed to keeping the fiscal deficit in check. “Trust is earned by performance, by reputation, by action, not just with words.” – AFP “The Secretary stressed that all commercial vessels should immediately comply with orders from U.S. forces as they seek to uphold peace and security in the Strait,“ spokesman Tommy Pigott said. “He underscored that violations of the US blockade and the illicit transport of Iranian oil will not be tolerated.” In other trade news, Canada had also reached out to American officials about further discussions on trade, the US official said, adding that Washington welcomed Ottawa’s decision to roll back some threatened trade measures in recent days that would have hit American streaming companies. Discussions on the US-Mexico-Canada trade agreement with Canada had been frequent but informal, and no major breakthroughs were expected at the summit, the official added. – Reuters

US, India to tackle trade at G7 but deal not imminent: Officials WASHINGTON: US Trade Representative Jamieson Greer will travel to India the week after the G7 leaders summit for further discussions on a possible trade deal, a senior US administration official said on Saturday, saying an agreement was possible. good deal is possible. I don’t think we’ll close that deal at the G7.” The Group of Seven summit, to be held June 15 to 17 in the French town of Evian-les-Bains, will bring together leaders from the world’s major economies, including Trump, alongside high-level delegations from other countries such as India. would have a good opportunity to take stock of the trade talks, but further technical discussions would likely be needed to close a deal. Indian officials said Trump and Modi were also likely to discuss broader geopolitical issues, including energy security and potential Indian purchases of Venezuelan oil.

Trade would be discussed during President Donald Trump’s meeting with Indian Prime Minister Narendra Modi during this week’s gathering in France, but no agreement on a trade deal was expected at the summit, the official said. “We know that Prime Minister Modi is quite ambitious about the role he sees for India, the importance of the US-India relationship,“ the official told reporters. “We think a potential trade deal is part of that.” Trump would insist on reaching “a very good deal,“ the official said, adding: “We think a very

India on Thursday also demanded an end to US strikes on shipping after three attacks on Indian-crewed tankers this week, including one that killed three Indian sailors. The deaths were the first reported since a US blockade on Iran-linked shipping began on April 13 in which American forces have disabled eight ships and turned back more than 100 others. US Secretary of State Marco Rubio discussed recent events in the Strait of Hormuz on Friday with his Indian counterpart, Subrahmanyam Jaishankar, the State Department said on Saturday.

Ties between New Delhi and Washington have been strained by US tariffs on Indian goods and Trump’s repeated assertions – which India denies – that he intervened to end India’s brief conflict last year with Pakistan. But the mood has improved in recent weeks, and the country’s trade minister, Piyush Goyal, last week said the first tranche of a bilateral trade agreement could be concluded by mid-July. India is pushing for preferential tariff treatment as part of negotiations on an interim trade deal. The senior US official said Trump and Modi