From the last days of August to early September, Indonesia was rocked by a series of violent protests in the capital Jakarta and other cities across the vast archipelago. These resulted in ten deaths, at least three people reported missing, and police stations and government buildings burnt down. Mobs looted the homes of prominent politicians, including that of the finance minister Sri Mulyani. Frequent comparisons have been drawn with the 1998 mass protests that brought down the dictatorship of Suharto.

The protests had been sparked by anger at Indonesia’s parliamentarians granting themselves an extremely generous housing allowance of just over US$3,000 a month (nearly ten times the minimum wage in Jakarta). Public outrage escalated rapidly on 28 August after a 21-year-old man, Affan Kurniawan, was run over and killed by an armoured police car. As South-east Asia watcher Erin Cook noted, while people being killed during protests are not uncommon, Affan’s death was filmed and subsequently went viral, allowing millions to witness it. Cook also points to the fact that Affan worked as an ojol (referring to Indonesia’s ubiquitous ride-share motorbike drivers). Outraged at seeing one of their own being run over, Indonesia’s army of ojol used their impressive mobilisation capabilities to facilitate some of the largest protests Indonesia has ever seen.

Yet the protests were fuelled by much more than just anger at parliamentarians and Affan’s death. The demonstrations are symptomatic of a heightened sense of economic anxiety currently felt by many Indonesians. In recent years, the country has undergone significant de-industrialisation, for two reasons. First, local industries have been decimated by a glut of cheap Chinese imports. Second, policymakers have shifted their focus to developing Indonesia’s capital-intensive commodities sector rather than labour-intensive manufacturing. While Indonesia is blessed with huge amounts of natural resources, such as nickel and palm oil, these industries simply don’t create enough well-paying jobs as manufacturing does.

Manufacturing’s share of GDP shrank from 32 per cent in 2002 to 19 per cent in 2024. As a result, Indonesia’s middle class has contracted by 20 per cent over the past six years. Purchasing power and consumption have declined accordingly. All this before Indonesia feels the full impact of the 19 per cent tariffs imposed by President Trump.

In light of this, one would think the heavy spending, populist programmes of President Prabowo Subianto (the former son-in-law of Suharto) would have been received well by Indonesians. Prabowo secured a landslide victory in 2024, promising both eight per cent growth (in comparison to the decades-long average of five per cent) as well as big-ticket social programmes, including a flagship US$28 billion free school meals programme. Economists questioned whether achieving eight per cent growth was feasible without a robust manufacturing sector. However, the crux of the issue for Prabowo was how to fund his programmes, with the government ultimately resorting to what Financial Times Asia editor Robin Harding described as ‘a strange combination of populism and severe public austerity’.

In order to free up some cash to fund his programmes, Prabowo enacted US$19 billion worth of austerity measures months after taking office. Given how much Indonesia’s economy is driven by government spending, these cuts would have an outsized impact. Several government ministries saw severe budget cuts; the public works ministry saw its budget slashed by 70 per cent (leading to the suspension and cancellation of several infrastructure projects), while the ministry of economic affairs’ budget was slashed by 52 per cent. The meteorological and geophysical agency, responsible for warning Indonesians of natural disasters, such as tsunamis, lost half its budget (a rather ominous decision given the country’s position on the Ring of Fire).

Several of the government efficiency measures have the air of the performative. Government agencies and ministries were asked to reduce spending on office stationery and official travel. Ministries were reported to be turning off lights and air conditioners at 4pm sharp to save money, while civil servants complained about a lack of toilet paper and water in offices.

Other measures elicited a deeper backlash. Cuts to the fiscal transfers to regional governments forced many of the latter to slash local services and raise property taxes (the town of Pati in Central Java, for example, saw an increase of 250 per cent in local property taxes). Unsurprisingly, regional parliament buildings were some of the main targets of many of the protestors.

In response to the protests, Prabowo is seeking to double down on his populist, pro-growth agenda while finding new creative ways to fund it (as Harding describes, to ‘ditch the austerity and keep the populism’). Worryingly, this might come at the expense of Indonesia’s traditional adherence to economic orthodoxy, long a key to the country’s attractiveness to foreign investors. On 8 September, Prabowo sacked the long-serving Mulyani – long favoured by markets for her fiscal conservatism – and replaced her with Purbaya Yudhi Sadewa, a former corporate leader who has voiced his enthusiasm for Prabowo’s ambitious eight per cent growth target.

Mulyani’s abrupt departure (reportedly given just one hour’s notice of her termination) followed apparent conflicts between her and Prabowo over the latter’s costly welfare policies. Her departure raised concerns about Indonesia’s future fiscal credibility, as did recent reports that parliament is looking to review a law that sets strict limits on the budget deficit and debt. Prabowo had previously voiced his desire to remove the legal deficit ceiling (presently set at three per cent of GDP).

Of more concern, the long-term independence of the country’s central bank, Bank Indonesia, may also be under threat. Like many strongmen around the world, Prabowo seems intent on co-opting Bank Indonesia into supporting his pro-growth agenda. He may already be succeeding. This month, Bank Indonesia signed a ‘burden sharing’ agreement with the government to help fund the latter’s welfare programmes. On 17 September, Bank Indonesia surprised markets by slashing interest rates for the third consecutive time, despite the rupiah being one of Asia’s worst-performing currencies of 2025.

Lawmakers are currently mulling changes to Bank Indonesia’s mandate to support the president’s pro-growth agenda, as well as provisions that would allow parliament to dismiss members of the central bank’s board of governors after an evaluation (including the governor of Bank Indonesia himself). At present, they can only be removed if they commit a criminal act or are incapacitated.

Undermining Bank Indonesia’s independence wouldn’t be out of character for Prabowo. Under both his administration and that of his predecessor, Joko Widodo, key national institutions such as the anti-corruption agency and the legislature have been undermined and co-opted to serve the interests of the executive. Arguably, Prabowo has exploited the protests to consolidate his own position. It is debatable, however, whether Prabowo’s populist agenda will resolve the deeper structural problems facing the Indonesian economy, namely that of low consumption and household demand brought about by deindustrialisation.

Indonesians would be better served if Prabowo focused on bringing manufacturing jobs back. Doing so will partly require tackling the flood of cheap Chinese imports decimating local industries. However, Jakarta may be loath to confront Beijing at a time of heightened geopolitical tensions between the US and China, when smaller states are being pressured to pick sides. And yet, as Sino-US trade tensions continue, Indonesia may see a further flood of cheap goods from China as Chinese exporters seek alternative markets to the US.

Ultimately, Prabowo seems intent on doubling down on his populist agenda while disregarding economic orthodoxy in the process (thereby scaring away much-needed foreign investments). Without tackling the deeper structural challenges facing the economy, the protests that roiled the country only a few weeks ago may serve as a prelude to more dangerous times ahead.