Business Daily – "What's going on with Indonesia's economy?"

Host: Sam Fenwick, BBC World Service
Date: October 14, 2025

Overview:

This episode of Business Daily explores the challenges facing Indonesia’s economy one year after President Prabowo Subianto’s populist administration took power. Despite promises of prosperity, free school meals, and faster growth, ordinary Indonesians grapple with rising living costs, public sector cuts, and shrinking opportunities. The show investigates the impacts on families, small businesses, and the broader economy, culminating in protests and skepticism about the government’s ambitious economic targets.

Key Discussion Points & Insights

1. Populist Policies and Rising Discontent

• After taking office, President Prabowo introduced sweeping populist measures—most notably, a free school meal program for nearly 90 million children and pregnant mothers.

• To fund this, significant cuts were made to other government programs, including salaries for teachers and civil servants, and research funding.

  • Quote:
    "Salaries of teachers have been cut. Salaries of civil servants have been cut. Certain research programs have been cut. And that has created a little bit of dissent, unhappiness amongst many different groups of people."
    —Shoaib Kadar, Economic Journalist (03:40)

• The middle class is shrinking due to rising costs and these funding reallocations.

2. Inflation and Household Strain

• Official statistics show moderate inflation (~2%) and growth (~5%), but daily essentials like rice, cooking oil, and school fees have surged much higher. For many, income is not keeping up.
  • Anecdote:
    Apriyanti, a mother of six in Jakarta, describes money running out halfway through the month despite attempts to monitor and curb spending.
    Quote:
    "The money just runs out halfway through the month… food is getting more expensive. Groceries are getting more expensive."
    —Apriyanti, Jakarta resident (05:20–05:27)

3. Struggles for Small Businesses

• Longstanding businesses like those run by Vania Mulyadi’s family see customer traffic plummet to a quarter of previous levels.

  • Quote:
    "So the last 12 months it's been going down, down very bad. It's a quarter. It's not even half anymore. It's a quarter."
    —Vania Mulyadi, small business owner (03:38)

• This downturn is part of a broader trend affecting the entire retail sector, not just isolated stores.

4. Tax Hikes, Budget Cuts, and Impact on Enterprises

• Sweeping public sector cuts (9% reduction in government spending) to finance flagship programs cause layoffs and reduced essential services.

• A new sovereign wealth fund consolidates control of state-owned companies, leading to declining government revenues and lower local/provincial budget transfers, forcing regional tax increases.

  • Quote:
    "They need to collect more money. So basically they're squeezing businesses."
    —Shoaib Kadar (10:06)

• Companies that depend on public contracts (e.g., PR, consulting) suffer from systematic budget reductions.

  • Quote:
    "Most of government, they cut or they decreased. The budget for communication is about 50% from the previous years. So it's… impacts greatly to the business."
    —Irwan Saputra, Jakarta entrepreneur (11:05)

• Small firms become more competitive by slashing prices but struggle with reduced margins and limited hiring prospects.

5. Youth Unemployment and Heightened Competition

• University graduates and young job seekers describe a hyper-competitive market with far more applicants than positions, pushing many to upskill or accept protracted unemployment.
  • Quote:
    "I graduated in 2017 but my last job was in November 2024. I've applied to many places… It's a bit difficult because the competition is also quite high."
    —Jobseeker at Jakarta fair (13:52)

6. Public Unrest and Protests

• Frustration with living costs, social inequity, and perceived political elite privileges led to mass demonstrations—especially among students, who have historically been a driving force for reform.

  • The August 29th protests escalated after the police killing of a 21-year-old delivery driver, Afan Kuniawan, symbolizing broader grievances.
  • Quote:
    "Protesters are here to expressing their solidarity to Afan Kuniawan, a taxi or motorbike taxi driver who was killed by police last night during protests."
    —Silvano Hajid, BBC reporter (16:11)

• Responding to unrest, Prabowo cancelled a diplomatic trip, cut back MP perks, and promised a "quick and transparent" investigation.

7. Government Optimism vs. Reality Checks

• President Prabowo set a growth ambition of 8% by the end of his term, far above projections by the World Bank and IMF (~5%).

• The Minister for Economic Affairs, Ayalanga Hartato, remains publicly optimistic:

  • Quote:
    "Indonesia can only grow with a better geopolitical environment… Next year our growth is expected to about 5.4%."
    —Ayalanga Hartato, Minister for Economic Affairs (17:34)

• The government touts shifts toward capital-intensive exports (e.g., nickel) and digital economy growth as drivers for future prosperity.

  • Quote:
    "Ten years ago… our export for nickel and downstream is only $3 billion. But last year… it's increased to $33 billion."
    —Ayalanga Hartato (18:29)

• Recent stimulus measures aim to calm unrest: a nearly billion-dollar package includes food aid, cash-for-work schemes, and tax breaks, but questions persist about their effectiveness in tackling root causes.

Notable Quotes & Memorable Moments

• On funding the free school meal program:
  "He's cut many other programs to fund his school program and that's caused a lot of other issues… once you cut salaries, that's really very difficult."
  —Shoaib Kadar (08:36)

• On small business decline:
  "It’s not even like our store, but the whole building is the same."
  —Vania Mulyadi (03:49)

• On young people’s employment struggles:
  "I have to be confident. Even though competition is high."
  —Fair attendee (14:54)

• On government optimism versus economic headwinds:
  "The policy can be accelerated toward higher growth, not only linear, but exponential growth."
  —Ayalanga Hartato (18:29)

Timestamps for Important Segments

• Introduction & Theme Setup: 00:59–01:53
• Small Business Reality in Jakarta: 02:10–04:02
• Cost of Living Experiences at Home: 04:56–05:48
• What Fuelled Prabowo’s Victory/Populist Promises: 07:25–08:24
• Expert Analysis – Budget Cuts & Social Unrest: 08:24–10:39
• Effects on Enterprises & Local Tax Hikes: 10:41–12:18
• Young Jobseekers Describe the Market: 13:15–14:54
• Student-Led Protests & Their Escalation: 15:59–16:41
• Ministerial Perspective on Growth & Job Creation: 17:34–19:29
• Closing Analysis & Stimulus Response: 19:29–end

Conclusion

The episode paints a portrait of an Indonesian economy at a crossroads—official stability masks significant pain among citizens and enterprises. President Prabowo Subianto’s ambitious, populist promises have delivered some benefits, but at the cost of public dissatisfaction, fiscal austerity, and unrest. Despite government optimism and new stimulus efforts, many Indonesians remain unconvinced that the prosperity they were promised is materializing, and businesses and younger generations face turbulent times ahead.