The Indonesian Ministry of Transportation estimates that 146.48 million Indonesians would travel for Eid in 2025, marking a 24% decrease from the figure of 193.6 million travelers predicted for 2024. This decline in overall travel demand has contributed to reduced ticket sales for PT Kereta Api Indonesia (KAI). As of March 30, 2025, KAI sold approximately 3.4 million tickets, accounting for 74.22% of the total 4.59 million seats available for the Eid transportation period from March 21 to April 11, 2025. This drop is significant as it represents the lowest ticket sales since 2018, excluding years when mudik was banned due to COVID-19 restrictions.

Eid travel and festive spending are on a very sharp decline, with money circulation estimated at 137.97 trillion rupiah ($8.33 billion) for Eid 2025, down from 157.3 trillion rupiah in 2024 and 150 trillion rupiah in 2023. Mainly due to economic constraints, many have had to change their budgets and, as a YouGov survey finds that while 43% of respondents increased their spending, 30% decreased it. Despite some increases, 88% prioritized budget efficiency to celebrate without overspending. The decreased spending during Eid also corresponds to Indonesia's broader economic challenges for 2025. The rising living costs and declining purchasing power influenced how consumers behave in the holiday season. Unlike the post COVID recovery years (2022 – 2024), current inflationary pressures and a slowing GDP growth makes it more difficult for households to maintain the previous levels of celebration and travel. 

When we look closely, it turns out that there was already a decline in purchasing power in September 2024. Indonesia experienced deflation for five consecutive months, from May to September 2024. In September, the Consumer Price Index (CPI) registered a monthly deflation of 0.12%, which was deeper than the 0.03% recorded in August 2024. In September 2024, Inventure conducted a survey, where 49% of middle class people stated that there is a decrease in purchasing power due to the high price of essential goods like food and energy. This sentiment was also substantiated by findings which indicates that many consumers were postponing large purchases such as cars and homes because of financial constraints.

This, again, slowed down the economic growth rate to 4.91% in the third quarter of 2024, down from 5.05% in the second quarter, largely due to declining household consumption, which is a critical driver of economic performance. This slowdown further reflects the challenges faced by consumers as they grapple with rising costs and stagnant wages. Despitelow inflation rates reported at 1.84% year-on-year the underlying factors contributing to deflation included a decrease in volatile food prices and government-regulated prices such as fuel. However, this does not negate the fact that many households felt squeezed financially.

The economic challenges at the end of 2024 have heightened market concerns about Indonesia's future economy in 2025. This situation has been further aggravated by the recent failure of the Coretax system.

In January 2025, Indonesia faced significant challenges with its newly launched Coretax system. Coretax is Administration System was developed as part of a broader effort to reform Indonesia's tax administration, which has faced longstanding inefficiencies and challenges in collecting taxes effectively. The plan initiated in 2018 to reform Indonesia's tax administration has turned into a major setback for the government. Tax revenue for January-February 2025 dropped by approximately 30%, amounting to IDR 316.9 trillion (USD 19.24 billion), compared to IDR 469.02 trillion during the same period in 2024. This decline is attributed to the flawed implementation of the Coretax system, which caused disruptions in tax collection and delayed payments, exacerbating fiscal instability and limiting government spending. 

Faced with challenges stemming from the Coretax system, the Indonesian government is now streamlining the Anggaran Pendapatan dan Belanja Negara (APBN), or State Budget. However, this budget management effort appears misaligned with other pre-planned government initiatives, such as the Indonesian Free School Meals Indonesian Free School Meals (MBG) program and Danantara. The MBG program, aimed at providing free meals to schoolchildren and vulnerable groups, was allocated Rp71 trillion in the 2025 APBN under the National Gizi Agency (BGN). However, Prabowo’s administration later claimed the program required Rp171 trillion due to expanded coverage. To fund this, the government ordered ministries and regional governments to "slash" budgets by Rp306.7 trillion, targeting operational expenses (e.g., travel, ceremonies) and transfers to regions despite Finance Minister Sri Mulyani initial assurance that MBG’s Rp71 trillion allocation would not worsen the deficit, as it was already factored into the APBN.

As President Prabowo announced the creation of Danantara in early February, a sovereign wealth fund with an initial capital of $20 billion (IDR 300 trillion) aimed at financing strategic projects such as smelters, data centers, and renewable energy initiatives. The government later revealed that Danantara’s funding would come from reallocated savings within the state budget (APBN), including IDR 90 trillion originally earmarked for state-owned enterprise (SOE) dividends. While these budget cuts were initially justified by the MBG program, Prabowo disclosed that IDR 150–160 trillion of APBN deficit savings had been redirected to Danantara.

This reallocation of public funds has generated doubts from both analysts and society at large. In fact, Nomura even projects that the deficit can climb to 3.4% of GDP in 2025 (above the legal limit of 3 percent) and potentially break the fiscal stability, apparently due to the overlapping priorities of the government. The lack of transparency in the funding process, most especially in how allocations for MBG programme overlap with Danantara has resulted in a lot of skepticism and criticism.  Critics point out that heavy emphasis and focus on high risk and highly rated projects such as Danantara at the expense of very important essential social welfare initiatives negates the fiscal priorities and discredits public trust.

Additionally, the fiscal logic diverting funds from essential services to Danantara was also questioned by the foreign investors, which also contributed to capital outflows and declines in the Indonesia Composite Index (IHSG). Although, the IHSG kicked off the year with a positive note, finishing January 2, 2025 with a close of 7,163.20, up by 1.18% on hopes for economic recovery as well as sign of foreign interest, the market began to show signs of strain in early February. Major bank stocks belonging to banks such as Bank Mandiri, BRI, and BNI, saw significant declines of 24.9%, 19.8%, and 12.6%, respectively, increasing fears and concerns about the financial health of very key sectors and overall economic stability.  By the end of February the IHSG remain volatile, as investors’ uncertainty was fueled by both the country’s domestic fiscal issues and global economic headwinds.

The situation got worse as, on March 18, 2020, the IHSG registered a sharp decline, falling to about 5.02% to a level of 5,146 during a trading session that led to a 30 minute trading halt due to excessive volatility. This marked a significant loss in investor confidence. Then, on  March 21st, 2025, Following the sharp drop earlier in the month, the IHSG closed at 6,258.18, reflecting a cumulative decline of approximately 3.95% for that week. On March 23rd, the analysts noted that net foreign selling reached approximately IDR 19.85 trillion over the month, contributing to the bearish sentiment surrounding the market. On March 27, things got a bit better,  a slight recovery leading up to the Eid al-Fitr holiday, the IHSG rebounds and rises to close at 6,510.62, higher by 0.59%, or 38.26 points, compared to the last trading day. 

While Indonesia was immersed in the peaceful and warm celebrations of Eid for over a week, President Trump unexpectedly threw a fiery curveball onto the global stage. The announcement of new tariffs during the Eid holiday intensified the already severe turbulence in the IHSG. On April 8, the market reopened again after the holidays, but the IHSG went down 7.9% from 6,510 to 5,996 points, causing a 30-minute halt in trading. The reason for this sharp decline was driven by increasing volatility and selling pressure as foreign investors recorded Rp8.02 trillion in March and Rp29.92 trillion year-to-date in net sales, indicating substantial capital outflows. Despite this initial drop, the IHSG began to recover on April 9 and 10, regaining some losses, although it remained down for the year.

All of this has impacted the rupiah exchange rate, which has fallen. The decline started on January 24, 2025, when the rupiah against the dollar dropped to 1 USD = 16,170 IDR. The rupiah has depreciated steadily since then, hitting its worst depreciation on April 7, 2025 at USD 1 = IDR 17,261 , the highest USD/IDR rate recorded so far in 2025. This figure broke the record for the worst rupiah exchange rate, even surpassing the 1998 Indonesian monetary crisis, when the rupiah reached 16,800 per dollar. The rupiah’s depreciation in 2025 is significant and psychologically impactful, touching levels reminiscent of the 1998 crisis.

However, stronger economic fundamentals, a more gradual decline, and different underlying causes mean that the current situation, though serious, is not as catastrophic as the 1998 monetary crisis, according to experts. Nonetheless, it cannot be denied that from the turbulence in the IHSG to the intense impact of Trump’s tariffs, many people have engaged in panic buying gold, which remains the most stable and liquid investment instrument, with its value continuing to rise and stay steady up to now.

Many foreign financial consulting firms have warned against investing in Indonesia, with some even considering the country unfit for investment. This is largely because foreign investors own significant shares in major Indonesian companies, including several under the Danantara, like BNI, BRI, and Mandiri Bank. Their growing skepticism has led to the decline in values at the Indonesia Composite Index (IHSG), as these investors increasingly view Indonesia as a risky market.

Indonesia’s current economic instability requires fast, quick, and very transparent government action, not the passage of laws that serve only a few. For example, the recent approval of the Military Bill (RUU TNI) caused South Korean investors to worry, given the sensitivity of Martial Law issues in South Korea.

The instability has also weakened Indonesia’s stock market, where shareholders quickly pull out at the slightest negative news. In a healthy market by contrast, rumors or bad news will not harm investor confidence and it is possible because shareholders are willing to place confidence into the strength and stability of underlying companies.

Trust in the market has also worn thin  due to controversial remarks by President Prabowo himself, who once stated that ‘stock trading is like gambling for the poor’ among others. Such statements have alarmed investors and undermined confidence in Indonesia’s economic leadership and about policy unpredictability.

In the end, the market demands good trust which essentially depends on consistent and predictable policies. While Indonesia still battles important economic hurdles, it remains capable of yielding substantial economic value. To restore investor confidence will require clear communication, strong policy consistency, and very constructive dialogue between the government, investors, as well as other stakeholders. The government must understand that its words have weight and are a nuclear button which can go haywire and shake markets at any time. A cruel reminder is that the market doesn’t lie.