Prabowo Subianto is the president. He markets himself as a friend of both Donald Trump and China's Xi Jinping.
Indonesia joined BRICS in early 2025.
Indonesia has prematurely deindustrialised: the share of GDP from manufacturing has fallen by half in two decades. Despite huge oil and gas reserves, it has been a net oil importer for 20 years. Its solar and wind potential has barely been exploited.
Economic growth accelerated to an annual rate of 5.1% in the second quarter of 2025; inflation has been near 2%. But first-quarter 2025 growth was the weakest since 2021. Consumer confidence has soured since December 2024. Sales of cars and two-wheelers both dipped 3% between January and April 2025 compared with the same period the year before. The 2025 Eid al-Fitr holiday saw 24% fewer travellers than the previous year, despite normally being a boon for spending as over 150m Indonesians return to their hometowns. Indonesian stocks have fallen by more than a tenth since Prabowo took office in October 2024, and the rupiah weakened by 7% against the dollar, briefly reaching an all-time low in April 2025, below the depths of the 1997-98 Asian financial crisis.
A 2003 law limits fiscal deficits to 3% of GDP. The government's income from tax equals 10% of GDP, only half the regional average. The 2025 budget assumes a deficit of 2.5% of GDP. The government relies on external financing. In January 2025 Prabowo made one-off "efficiency" cuts worth $19bn, including slashing public-works-ministry funding by 70%.
Free school lunches are Prabowo's most high-profile campaign promise. The 2025 budget includes $4bn for the programme, with Prabowo's brother saying the president had promised an extra $6bn on top. Dozens of children have been hospitalised after eating bad food provided by the programme. Corruption watchdogs have called for a halt, alleging that money may be leaking out. The programme aims to provide calories in a country where poor nutrition, not calorie deficiency, is the bigger problem.
A new state revenue agency reports directly to Prabowo. The finance ministry launched Coretax, an online tax-filing portal meant to raise the tax-to-GDP ratio by two percentage points. But a previous e-filing system set up in 2018 made little difference. Coretax has suffered 34 technical errors; an older system had to be revived in February 2025 so Coretax could be patched up. In the first two months of the year Indonesia posted a surprise fiscal deficit driven by a 30% drop in tax revenue related to Coretax's shaky rollout.
In February 2025 Indonesia launched Danantara, a sovereign wealth fund put in charge of $900bn in state-owned enterprise assets. These assets yielded around $5bn in dividends in 2024, money that would once have flowed directly to the central government.
The Saldo Anggaran Lebih (SAL) is a $27bn accumulated budget surplus held in government coffers, built up by Sri Mulyani Indrawati as a rainy-day fund. After sacking Sri Mulyani, Prabowo elevated Purbaya Yudhi Sadewa as finance minister. Purbaya plans to spend more than half the SAL by the end of 2025, having injected $12bn from the fund into Indonesia's state-owned banks in September 2025 as a stimulus. He has pledged 6-7% growth for 2026, up from 5%, and defended central-bank independence. The budget deficit has risen to just under the legally mandated cap of 3% of GDP, driven partly by falling commodity prices. Budget projections for 2026 look too rosy. Foreign investors have sold $6bn-worth of government bonds since August 2025; foreign holdings have fallen from a pre-pandemic peak of 39% to just 14%. The central bank has filled the gap and now owns a quarter of rupiah-denominated government bonds.
Indonesia has a population of around 290m, making it the world's biggest Muslim-majority country. The 3% deficit cap was imposed by law in 2003 and was copied somewhat arbitrarily from the EU's Maastricht treaty. Last year's fiscal deficit, at 2.9% of GDP, was Indonesia's largest ever excluding the pandemic. Tax revenue fell by 3% in 2025. Interest payments consumed 16% of revenue last year, up from 9% a decade ago; ratings agency S&P warns a sustained rise above 15% could justify a downgrade. Indonesia's debt-to-GDP ratio is about 40%. Tycoons—mostly ethnic-Chinese bosses of conglomerates—have been tapped to buy $3bn in "patriot bonds" paying below-market rates to finance a Danantara waste-to-energy project. The central bank, Bank Indonesia, has launched a "burden sharing" programme paying higher interest on government deposits to support Prabowo's projects.
In response to the closure of the Strait of Hormuz, Indonesia capped fuel purchases at 50 litres per day and raised its biodiesel-blending cap to allow a mix that is half palm oil. Civil servants were told to stay away from the office to reduce fuel consumption. The country was estimated to be five or six weeks from running short of petrol.
Indonesia has banned the export of many raw commodities. Its government raised over 9bn yuan in Hong Kong in February 2026 by selling yuan-denominated "dim sum" bonds.
America's now-delayed 32% tariff on Indonesian exports has not yet taken effect. Indonesia is less exposed to tariffs than South-East Asian neighbours such as Vietnam. Prabowo has supported local-content requirements but his support has recently wavered; in April 2025 he said they may need to become "more realistic".
Indonesia issued more than 100,000 residence permits to Chinese migrants in 2024, more than double the number issued to people from all other countries combined, up from 80,000 the year before. Chinese entrepreneurs are transplanting businesses wholesale from Chinese cities, fleeing a slowing economy and cut-throat competition at home. Chinese brands made up more than 90% of EV sales in the first half of 2025. BYD is spending more than $1bn to build a factory in West Java that will produce up to 150,000 cars a year. GAC Aion, XPeng and Wuling have already started manufacturing locally.
Indonesia attracts EV manufacturers in part because it has the world's largest reserves of nickel. Chinese firms already control three-quarters of nickel refining in the country. CATL is constructing an integrated battery plant in West Java while Huayou Cobalt, a Chinese firm, replaced LG, a South Korean company, as the lead partner in a separate battery project. The two projects together involve nearly $10bn in Chinese investment.
Pantai Indah Kapuk (PIK), a new city in north Jakarta built in part on reclaimed land, around two-thirds the size of Manhattan, is popular with new arrivals from China. Its shopping centres are filled with Chinese brands including Mixue, which has 2,600 outlets in Indonesia—by far its largest market outside China. Some Indonesians of Chinese heritage avoid PIK, remembering anti-Chinese riots in 1998 when hundreds of Indonesian-Chinese were murdered.
The quality of journalism in Indonesia has declined sharply in the past five or six years, mostly because of financial pressure. Government advertising goes to fawning outlets. Big private advertisers shun critical media for fear of upsetting politicians. Wahyu Dhyatmika, the CEO of Tempo Digital, an independent news outlet, says they do not "see Tempo as a safe brand because we do investigative journalism". When Tempo's journalists report on corruption, they are doxxed; one was sent a severed pig's head; others have received dozens of unrequested food deliveries—a reminder that the bigwigs they report on know exactly where to find them. See press freedom.
Sumitro Djojohadikusumo, the father of President Prabowo, was the architect of Indonesia's post-independence development and founded the economics faculty at the University of Indonesia. He served as a minister under both Sukarno and Suharto. He completed his PhD thesis on rural credit in Java in 1942, while living in the German-occupied Netherlands. When Indonesia lacked trained economists, he persuaded the Ford Foundation to send students to the University of California, producing the "Berkeley Mafia" of technocrats who later drove Suharto's economic success. His economic philosophy was pragmatic, not ideological: he believed in rigorous training, evidence and avoiding direct state intervention where capacity to execute it well was lacking. At the height of the Asian financial crisis in 1998 he diagnosed what he called Indonesia's "institutional disease": the corrosion of public policy by vested interests, as Suharto bent state power to serve his family's businesses.
On August 28th 2025, a 21-year-old motorbike-taxi driver was killed by an armoured police vehicle during a demonstration outside Indonesia's parliament. Video of the incident spread on social media, and thousands took to the streets across the country demanding accountability and a long list of reforms. Vandals set two regional-parliament buildings alight, in Makassar and Mataram. Looters sacked the houses of five officials, including finance minister Sri Mulyani Indrawati.
Prabowo said he supports the right to peaceful assembly, but that some demonstrations tended towards terrorism and sedition. He ordered the armed forces and police to take the strongest possible lawful actions against rioters.
Protesters waved the Jolly Roger flag from "One Piece", a popular Japanese manga and anime series, as a symbol of rebellion against the corrupt establishment. The government threatened treason charges, which only broadened the flag's appeal. Indonesian MPs eventually decided the flag was a threat to national unity.
Root causes included unhappiness about the economy—rice prices were 34% higher than three years earlier, unemployed university graduates had leapt by 25% since August 2022, and the share of non-performing household bank loans had surged to a record—and anger at Prabowo's attempt to squelch political-party opposition. A plan by MPs to give themselves a housing allowance of $3,000 a month (in a city where the monthly minimum wage is little more than a tenth of that) provoked particular fury; Prabowo promised to reverse it.
All but one of the eight parties in the lower house have joined the ruling coalition, and Prabowo continues to woo the holdout. He has talked of making such an arrangement "permanent", arguing that it better reflects Indonesian culture than adversarial systems, harking back to the political set-up under Sukarno. Critics say this would leave no tolerance for opposition political parties in the legislature.
Suharto, dictator from 1967, appointed American-educated technocrats and oversaw three decades of rapid development, but his family and cronies increasingly abused the financial system. The 1997 Asian financial crisis exposed the extent of this corruption; 36m Indonesians fell back into poverty. Suharto stepped down in 1998, marking the start of reformasi, Indonesia's transition to democracy.
On November 10th 2025 Prabowo formally elevated Suharto to the pantheon of national heroes—but simultaneously named several of the dictator's opponents national heroes too, including Abdurrahman Wahid (Gus Dur), a cleric who led opposition and became the first freely elected post-Suharto president, and Marsinah, a labour activist murdered in 1993. Sarwo Edhie Wibowo, one of Suharto's top lieutenants in the 1965-66 massacres of suspected communists, was also honoured. Critics say the gesture flattens Indonesian history to Prabowo's advantage, given his own Suharto-era record as commander of the dictator's special forces. Prabowo's calls for a "permanent" all-party governing coalition amount, in the eyes of his critics, to a return to the authoritarian politics of the Suharto era.
Jakarta is the world's most populous city according to United Nations data released in November 2025, which for the first time accepted the reality of urban sprawl rather than relying on national governments' definitions of city boundaries. By the new measures Jakarta has 42m people, about as many as Canada. After years of expansion it now encompasses the neighbouring cities of Bogor, Depok, Tangerang and Bekasi, yet there is far too little co-ordination among these neighbouring authorities. Jakarta is the world's 12th-most congested place. Unable to afford housing near their workplaces, many residents live in far-flung suburbs and travel by two-wheelers or in cars, jamming up the roads and causing air pollution. The government of Jakarta reckons traffic jams cost its economy $6bn each year. In 2019 Jakarta got its first metro line, but it stops abruptly at the city's official administrative boundary, short of commuter neighbourhoods. By 2050 Jakarta is expected to add another 15m people or so.
In late 2025 three simultaneous cyclones and an intense monsoon devastated parts of southern Asia. Indonesia accounted for nearly half the death toll across the affected region—at least 1,600 people perished in total across Indonesia, Sri Lanka, Vietnam and Thailand. Cyclones are uncommon so close to the equator, which worsened the effects because Indonesians had little experience of such extreme weather, according to the World Meteorological Organisation.
Cyclone Senyar, a once-in-70-year event, ravaged Sumatra in late November 2025, bringing enormous floods. More than 1,000 people were killed, around 150,000 homes damaged and nearly 1m people displaced. Officials declined to formally designate it a national disaster, which would have granted emergency powers and made it easier to accept foreign aid. Prabowo insisted Indonesia did not need outside help, dismissed some criticism as lies spread by hostile foreign forces and apologised for delays in assistance. Officials estimated it would cost 52trn rupiah ($3.1bn) to rebuild. Environmentalists say deforestation worsened the floods: since 2001 Sumatra has lost 4.4m hectares of forest, roughly the size of Denmark, mostly to palm-oil plantations and illegal logging. Indonesia's forests minister admitted that poor forest management aggravated the disaster. Indonesia ranks third globally in its vulnerability to natural disasters, according to an annual report from an alliance of German NGOs. See also climate change.
Indonesia's state ideology, pancasila, forbids atheism but guarantees religious freedom for six officially recognised faiths: Islam, Protestantism, Catholicism, Buddhism, Hinduism and Confucianism. Muslim organisations such as Nahdlatul Ulama, which claims more than 100m followers, promote an inclusive Islam that blends with local traditions. These groups run schools, hospitals and universities while promoting the idea that Islamic values and democracy reinforce each other. Indonesian Islam has absorbed centuries of Hindu-Buddhist practices, animist beliefs and diverse indigenous cultures.
Yet piety is ascendant. The share of Indonesian women who wear the hijab has surged from around 5% in the late 1990s to roughly three-quarters today—a transformation driven by social pressure and voluntary adoption rather than laws. Observant Muslim influencers command huge online audiences, often promoting conservative interpretations to millions. In February 2026 a new criminal code came into force that bans pre-marital sex and expands the scope of the crimes of blasphemy and apostasy. The code also recognises "any living law", which could allow local officials to enforce sharia strictures that discriminate against women and minorities. Indonesia challenges the assumption that modernisation naturally leads to secularisation: despite its economic progress, religiosity is intensifying.
Indonesia sits upon some of the world's most strategic waterways. Modelling by The Economist estimates that blocking the Strait of Malacca would force around 21% of global seaborne trade to reroute, adding an additional 1,200km to ships' journeys; blocking all of the Indonesian straits—including the Sunda, Lombok and Makassar straits—would affect some 26% of global seaborne trade, requiring an average detour of 7,800km. See maritime chokepoints.
In April 2026 Prabowo mused publicly that 70% of East Asia's energy needs and trade pass through the Indonesian straits. His finance minister, Purbaya Yudhi Sadewa, then complained that ships passed through the Strait of Malacca without being charged a toll, wistfully noting that Iran had begun charging traffic through the Strait of Hormuz. Singapore and Malaysia immediately objected. Singapore's foreign minister, Vivian Balakrishnan, said: "The right of transit passage is guaranteed for everyone." Indonesia's foreign minister, Sugiono, responded that Indonesia would keep the strait free, noting the country had made a deal during UNCLOS negotiations to allow innocent passage through its straits in exchange for recognition of its claim to all of the waters between its 17,000 islands.
Indonesia raised the possibility of a Malacca toll once before, in the mid-2000s, when pirates based on Sumatra's coast menaced container ships and tankers. Singapore shot down the idea then, too, and Indonesia eventually joined Singapore, Malaysia and Thailand in conducting joint air patrols of the strait.
Indonesia hosted the Bandung conference in April 1955, the first summit between Asian and African countries, which set the mood for decades of protest against the West by the global south. Sukarno, then Indonesia's president, was a key figure. The 60th-anniversary gathering in 2015 attracted delegations from half the world. The 70th anniversary in 2025 passed without official celebration, reportedly in part because Sukarno was the father of a key political rival of President Prabowo.
Enjoy yourself while you're still old.