We must return to the pandemic to find an Indonesian rupiah weakened against the euro. It is even worse against the US dollar, which has not been so poorly valued since the Asian crisis 1998.
This is due to investors' disappointed attacks. The latter expected President Prabowo Subianto (who had been in office since October) to remain on the line of his predecessor, the reformer and very popular Joko Widodo.
But the first months of his presidency are not reassuring. Balancing the budget is increasingly delicate, and interest groups linked to the President are interfering heavily, to the point that the resignation of the Finance Minister has been mooted.
At the same time, Prabowo, a retired Indonesian army general, does not hesitate to put the armed forces at the heart of governance.
Political turbulence had its consequences
After years of growth close to 5%, Indonesia is waiting for a new wave of reforms, likely to push growth towards 8%, the level Prabowo promised for the end of his term in 2029.
Instead, it sees the military's growing influence in the country's institutions, with parliament even approving a new law that allows active military personnel to take on leadership roles in several civilian institutions, including the judiciary.
Monetary authorities must remain credible
Investors are distrustful of this governance, which can be improved. They avoided the rupiah to the point that the central bank intervened several times in the foreign exchange markets to help them. In euro terms, the Jakarta stock exchange has lost some 17% since the beginning of 2025, the worst performance among the markets that make up our investment universe.
Faced with doubts about governance, the monetary authorities must remain credible to stabilise their currency and allow this Asian giant to fulfil its enormous potential.
Yet it is still offering profitable opportunities
Indonesia is, therefore, experiencing turbulent times, and it will be very difficult for it to move up a gear in terms of growth.
We expect it to stabilise around the 5% the country has accustomed us to for a few years. But even at such a level of growth – which would be disappointing according to Jakarta – the Indonesian archipelago remains extremely promising. We continue to invest 5% of our neutral and dynamic portfolios in this sector.
THE EURO IN INDONESIAN RUPIAH (In IDR for 1€)
Exchange Rates (EUR in) The Indonesian rupiah and the Jakarta stock exchange are struggling, frustrated by the lack of reforms and the growing role of the army. Nevertheless, the country remains extremely promising.