Protesters will walk with Indonesian flags in front of the police headquarters that was lit and sacked during a demonstration in Surabaya on August 31, 2025.
Juni Kriswanto | AFP | Getty Images
Indonesia is facing a harsh political situation as it tackles rising costs of living, MPs’ wages and police violence, hurting investors’ feelings in Southeast Asia’s largest economy.
The Jakarta Composite Index fell to 3.6% on Monday, but Indonesian rupiah fell to 16,500 against the US dollar, according to LSEG data.
While violence and protests rattle investors’ confidence, it is unlikely to challenge Indonesia’s fundamental growth narrative, some market watchers said.
The latest sale was primarily “sentiment-driven” as investors responded to development over the weekend, said Hauchong Wang, managing director of Asian bonds for major bonds.
Indonesia remains ranked in a more stable emerging market, Hau said, shrugging the impact from the demonstrations as a short-term setback. “I don’t think I’ll completely change the story at this point.”
According to Christopher Wong, a forex analyst at OCBC Bank, the short-term softness of the rupiah is expected to be temporary and could turn it around as domestic uncertainty fades. He refrained from making more accurate predictions, citing the growing uncertainty.
It was unclear whether demonstrations in Jakarta or other cities would continue on Monday. Some Indonesian students and civil society groups have halted the protests to avoid violent escalation by authorities.
Ali Jahaja, head of Indonesian research at Macquarie Capital, said investors will be monitoring the government’s next steps to address the demands of the public and improve market confidence. “On the slightest positive side, Indonesia could emerge more strongly if structural reforms were implemented.”
DBS economist Radhika Rao agreed that the long-term growth driver for Indonesia will remain the same. Investors will monitor signs of priorities for the government to boost growth and work, she said she hopes that some of Jakarta’s spending cuts will be redirected to alleviate unemployment.
The Indonesian Bank still has enough room to maintain its policy, she said she hopes the central bank will act quickly to calm the market and intervene to support the Rupiah.
According to LSEG data, Indonesia’s 10-year government bond yield rose to 6.335 on Monday, but 30-year debt yields remained largely unchanged at 6.850.
Something that promotes protest
Thousands of protesters from several major cities in Southeast Asian countries have gathered for about a week, indicating an increase in cost of living, high unemployment and many view lawmakers as excessive wages.
The housing allowances for lawmakers, who are said to be 10 times the country’s minimum wage when tax payments, layoffs and inflation collide with low-income Indonesians, are key to stealing the public’s rage.
The complaints about the financial difficulties have been transformed into wider anger after the reported motorcycle taxi driver was killed during a police lawsuit at the protest site last Thursday. The incident has sparked a wave of violent protest across several Indonesian cities and calls for police reform.
Media reports say protests have escalated over the weekend, targeting lawmakers’ homes, looting property, and burning government buildings. Hundreds reportedly raided the residence of Finance Minister Srimrani in Southerngeland, chasing and robbing valuables.
Indonesian President Prabobo Suboant said on Sunday that Congress will listen to people’s concerns and act in order to quell public rage.
Indonesia, the world’s fourth largest economy with a population of 284 million, was considered one of the most stable economies in Southeast Asia. The latest protest, which killed at least five people and injured hundreds, has created the nation’s worst crisis since taking office about a year ago.
“This moment represents an important test of Prabowo’s approach to opposition,” said Bob Herrera-Lim, managing director of political consultancy Teneo. “The president may be worried that he may be worried that he will continue to lay ground on the streets for more than a few days.
The president warned that violent protesters would be deprived of solid action. “We cannot deny any signs of very legal and illegal behavior. Some can even lead to treason or terrorism,” he reportedly ordered the military and police to take harsh actions against rioters and looters.
