Jayanty Nada Shofa & Ria Fortuna Wijaya, Jakarta – The spotlight will fall on President Prabowo Subianto's second State of the Nation address on Friday, with economists reminding the leader to address problems head-on and avoid setting sky-high targets for 2027.
It has been a tradition for Indonesian presidents to lay out their future economic ambitions before the Independence Day's celebrations on Aug. 17. With just a few hours away from Prabowo's speech, Andalas University economist Endrizal Ridwan sees 5-6% year-on-year (yoy) growth as a more realistic goal for 2027. He expects the rupiah at around Rp 17,000-18,000 per dollar, inflation at 3-4%, and unemployment at 4-5%.
Bhima Yudhistira, the executive director of the think tank Celios, is pessimistic, believing the GDP would only expand between 4.1 and 4.6% yoy. Inflation is forecast at 3-3.5% yoy. The rupiah will hover around Rp 18,500 and Rp 18,700 per dollar in 2027. He hopes Prabowo will "refrain from speaking off the cuff" to avoid weakening investors' confidence.
"Investors demand clarity on the economy. They want to see realistic targets and the government's plans towards those goals," Bhima told the Jakarta Globe.
Talitha Chairunissa from the Indonesian Economists Alliance (AEI) said the government should consistently direct resources toward evidence-based policies and sectors with high multiplier effects, rather than simply pursuing high headline growth. She declined to give estimates for what would make realistic targets.
"What we need is not just a green report card on paper, but real impacts felt by all segments of society," Talitha said, referring to economic targets amid geopolitical and climate-related pressures.
What Prabowo must not miss out on
According to Bhima, the drought-inducing El Nino is something that demands attention in Prabowo's upcoming speech. He called on the retired army general to quickly come up with mitigation packages, including possible incentives for local communities and sub-national governments to prevent forest fires. El Nino mitigation should also get bigger budget allocations in the years to come.
Endrizal expects Prabowo to reveal his plans on how he will maintain rupiah stability and strengthen the Jakarta Composite Index (JCI). He said heavy debt-funded spending could put further pressure on the rupiah by raising expectations that Bank Indonesia may eventually be forced to use seigniorage to finance government spending.
"People want to hear the government's commitment to fiscal discipline. ... Seigniorage will not only threaten the rupiah's future stability, but will also lead to an immediate impact," Endrizal explained.
Corruption – a theme that dominated Prabowo's 2025 address – should remain on the speech agenda.
"Prabowo must bolster commitment to eradicating corruption, especially in licensing bureaucracy that has become an obstacle for businesses," Talitha said.
Trimming the fat in populist programs
The three economists all agree that Prabowo should cut back on populist policies, particularly the cost-heavy free meal rollout. Indonesia initially earmarked Rp 268 trillion ($15 billion) for this program this year, but later cut it to Rp 229 trillion ($12.8 billion). The House of Representatives forecasts a major cut to Rp 174 trillion ($9.7 billion) in the program for next year.
Rather than the free meals, Bhima said the money should have gone into protecting the middle class, who have had zero access to subsidies and social aid. On populist programs, Talitha urged the government to show "political courage by delaying, thoroughly assessing, and redesigning initiatives that fail to deliver satisfactory results".
Endrizal, too, wants bigger priorities on law enforcement, infrastructure, education, and health, which he said would improve the investment climate and support long-term growth.
"The government must cut back on spending that directs funds to individuals rather than to the public collectively, including the free meal. Such spending cannot drive sustainable economic growth," Endrizal cautioned.
Talitha called for a stronger focus on restoring real wages and creating quality formal jobs, noting that much of recent employment growth has been in low-paid or unpaid informal work.
"The government needs to rationalize 'other spending', cut overlapping bureaucracy and remove regulatory and bureaucratic barriers that create a 'bribe tax', while restoring cuts to regional transfers to ensure local economies can also grow," Talitha wrote to the Globe.
In a rare speech to the parliament in May, Prabowo had already set ambitious targets for 2027: a GDP growth of up to 6.5% yoy and an exchange rate of Rp 16,800-17,500 per dollar. He wanted to keep inflation between 1.5% to 3.5%. At least once a week, Prabowo would assure the public that Indonesia's economy is doing well.
"Trust your government and leaders. We are always working in your best interests," Prabowo said D-1, as he launched the police-backed renovation bridge programs spanning 19.2 kilometers.