Sumber: Infobank
A crisis is approaching. Almost every economic indicator is getting worse. It started with foreign investors pulling out of the stock market. Stock prices have dropped sharply. The value of the rupiah has fallen significantly. Even more surprisingly, government revenue has decreased. In fact, it almost feels like the tax income was pre arranged. If we talking about purchasing power. Don’t even ask, it’s collapsed. Interest rates are still unclear, while bank lending has reached its limit. Liquidity in the market is drying up. The competition among banks, as well as between banks and Government Bonds (SBN) and Bank Indonesia’s Rupiah Securities (SRBI), continues.
Ironically, even as the situation becomes more critical, the government, just five months in seems indifferent. It looks like they either don’t understand or don’t want to address the economic troubles signalling an impending disaster. The economic ministers are busy inspecting cooking oil fraud or staying silent. Whether they are unsure of what to do, or are afraid of the president, is unclear. The ministers’ quality has yet to be seen. What’s worse, corruption is openly visible in the Ministry of Forestry with the appointment of unqualified staff from the PSI group.
The situation is uncertain these days. Since the “Red and White” Cabinet was formed, many policies have been inconsistent. Decisions change rapidly “morning tempeh, evening soy” giving some meaning that the policies keep shifting. Infobank has noted a few of these policies: First, the reconsideration of the 12% VAT on luxury goods, a review of the 3 kg LPG gas policy, and the cancellation of CPNS recruitment.
Second, the decision not to revoke sea boundary certificates. Third, the establishment of Danantara, which continues to raise public suspicion. This makes sense, as Danantara’s management doesn’t resemble global super holding structures but instead looks more like a political organization than a business entity.
The public is confused. Policies seem to be cancelled on a whim. Meanwhile, some indicators are showing that the economy is trending negatively. One of the most puzzling developments is the drop in national revenue in January 2025, which fell by 28%. Tax revenue decreased by 41.9%. The State Budget (APBN) has a deficit of Rp31.2 trillion. This is the first time in four years that the APBN has run a deficit so early in the year.
Debt increasing by 43.5%, reaching Rp8,909 trillion, comes as no surprise. Some predict that by the end of 2025, the debt could exceed Rp10,000 trillion. The burden of paying interest is also growing. New debt is being used to pay off old debt, which is similar to a Ponzi scheme.
It’s not surprising that foreign rating agencies have downgraded Indonesia’s financial instruments. After Morgan Stanley, J.P. Morgan, and Goldman Sachs, the OECD has also expressed concern over Indonesia’s economic growth, predicting it will only be 4.9%, down from a previous forecast of 5.1%.
At the same time, the banking sector is still facing an old problem, liquidity shortages caused by excessive credit expansion. The banking system is under pressure, and the competition for liquidity is intense. The loan-to deposit ratio (LDR) is approaching 95%, which indicates a tight market.
The top banks, which led credit growth last year, are now struggling to find funds. Securing liquidity has become a top priority. The second issue is the quality of credit, which is showing signs of deterioration, both in percentage and nominal terms.
State-owned banks (BUMN) are facing greater burdens. There is a push for credit “commands,” with loans required to go to Red and White Village Cooperatives (Kopdes), which number around 70,000 to 80,000. The total loan amount could reach Rp350 trillion to Rp400 trillion if each KopDes gets Rp5 billion, which is creating challenges for bankers. This is reminiscent of the damage caused to KUDs (Village Unit Cooperatives) and KUTs (People’s Business Credit) before the 1998 crisis, chaotic and unsustainable.
Just like in the early stages of the crises in 1998, 2008, and during COVID-19, the best option now is liquidity. Nothing is more important at this moment than liquidity. Cash is king when it comes to anticipating the uncertain economic conditions that are signalling an impending crisis.
Unfortunately, the government itself seems unaware of the worsening economic signs surrounding Indonesia. There is still time to make improvements before the economy is hit by the harsh realities of the market. The inconsistent economic policies must end immediately.
The government’s behaviour is not market-friendly. Now, before the economic report card turns red, it’s time to return to proper governance, following principles of integrity and public benefit, not “flip-flopping” policies, especially since economic indicators are showing alarming signs. Playing with fire in the market could lead to disastrous consequences.
Ironically, even as the situation becomes more critical, the government, just five months in seems indifferent. It looks like they either don’t understand or don’t want to address the economic troubles signalling an impending disaster. The economic ministers are busy inspecting cooking oil fraud or staying silent. Whether they are unsure of what to do, or are afraid of the president, is unclear. The ministers’ quality has yet to be seen. What’s worse, corruption is openly visible in the Ministry of Forestry with the appointment of unqualified staff from the PSI group.
