Indonesia faces mounting signs of economic strain as a shrinking middle class, youth unemployment, and government policies collide with international index warnings and market turmoil.
When Novri Putra entered college in 2018, Indonesia’s economy was flourishing with a booming tech sector and surging demand for software engineers. Graduating last year with an information technology degree, the 28-year-old expected a stable career in web development. Instead, he works for a tech company as a motorcycle taxi driver making about $220 a month, facing daily scolds from his parents.
Mr. Novri’s predicament reflects a broader malaise in a nation of nearly 290 million people. Once regarded as a reliable safe haven against currency collapses and hyperinflation, Indonesia is now showing mounting signs of economic strain, with inflation rising and fuel shortages spreading across multiple cities.
Stock Plunge and Index Warning Stun Jakarta Markets
The economic turbulence reached a breaking point when influential index provider MSCI warned it could drop Indonesia from its benchmark indexes, which guide investment decisions for fund managers worldwide. Indonesia’s exchange has lost nearly 40 percent of its value this year.
Policies under President Prabowo Subianto are shaking investor confidence, weakening institutions and raising doubts about the country’s economic management. Two credit ratings agencies, Moody’s and Fitch, downgraded Indonesia’s outlook to negative from stable earlier this year.
Shrinking Middle Class and Soaring Youth Unemployment
While the nation still reports strong headline economic growth, underlying indicators reveal deep domestic hardship. The population considered middle class has shrunk by about 19 percent from its peak, lower-class savings rates have plummeted, and youth unemployment hovers around 17 percent.
For everyday citizens, the squeeze is altering daily life. Erika Ananda Fatimah, a 52-year-old university lecturer earning about $820 a month, has cut out Starbucks coffees, trips to Malaysia, clothing shopping, and gym visits.
Mr. Latuhihin, who served on an expert council advising Mr. Prabowo before his administration took office, warned that the current moment bears dangerous similarities to the late 1990s. No one predicted in 1997 that Suharto would fall because of the malfunction of the economy,
he noted, adding, The same story, I believe, might happen to this government.
Global Supply Chains
Experts do not expect the market turmoil to spread to regional neighbors.
