President Prabowo Subianto has reshuffled five of his ministers. The new finance minister has launched a new strategy to stimulate the economy, which has been stagnant at around 5%. How will banks utilize Rp 200 trillion in liquidity provided by the Government amidst a struggling real sector and numerous factories closures? What will economic and banks credit growth be in 2026?
IT’S been a year since President Prabowo Subianto took office, and the initially hopeful political honeymoon period has now ended with a challenging socio-economic test. The large-scale demonstrations that led to looting in August 2025 are a stark reminder that the promise of prosperity has not been fully realized by the people. The cost of living is getting heavier, purchasing power is weakening, and job opportunities are shrinking.
The middle class, which has shrunk by 1.2 million people annually since 2019, is increasingly squeezed. They must bear a heavier tax burden amid rising prices for necessities. In contrast, public officials appeared insensitive, for example, when legislators danced for joy after the announcement of a Rp 50 million per month increase in housing allowances. This action deepened public disappointment towards the Government.
On paper, the economy looks promising. Growth in the second quarter of 2025 is recorded at 5.12%, public surveys show high levels of satisfaction, and political stability is considered under control. However, these positive macro indicators are not in line with the reality on the ground. The retail market is sluggish, the business world is stagnant, and banks are struggling to disburse credit due to low demand. Just like the Black Swan theory, social unrest has emerged just when the Government thought everything is fine.
In response to this shock, the Government has acted quickly. The President has launched a Rp 16.23 trillion stimulus package with three main programs: acceleration, sustainability, and employment. Furthermore, a reshuffle of five ministers, including the Minister of Finance, was implemented. However, the stimulus immediately drew criticism.
“That figure is less than 1% of gross domestic product, so I don’t think it’s enough to stimulate the economy,” a former BI official told Infobank. Critics also called the stimulus is more politically motivated, as it is directed at villages, fishermen, and local finance organizations (koperasi), while the labor-intensive manufacturing sector, which employs a significant workforce, is overlooked.
The change in Finance Minister drew significant attention. Sri Mulyani, previously was considered strong in maintaining fiscal credibility, is accused of failing to strengthen state revenue and relying too heavily on foreign loans. “She can’t handle the necessary transformation of state revenue institutions, such as the Directorate General of Taxes and Customs. It’s like being a military commander without ever having commanded a platoon, battalion, or division,” said a senior banker.
Purbaya Yudhi Sadewa, the former head of the Deposit Insurance Corporation (LPS), is ultimately entrusted with the role. Unlike Sri Mulyani, who is prostability, Purbaya is known for his pro-growth stance. He immediately made a strong statement: “People are having difficulty finding jobs and so on because of mistakes in monetary and fiscal policies. The Ministry of Finance can play a role in this by transferring some of the money held by the central bank to the banking system, which will spread the money so the economy can work.”
The Government’s Rp 459 trillion in surplus budget funds (SAL) at Bank Indonesia (BI) became a target. On September 12, 2025, Purbaya transferred Rp 200 trillion to the Himbara banks: Mandiri, BRI, BNI, BTN, and BSI. This policy is a new strategy expected to stimulate bank credit and boost the real sector.
Abundant Liquidity Amidst a Struggling Real Sector
However, a big question arises: Can this massive fund actually be absorbed? In fact, the real sector is struggling. Many factories have closed due to weak demand, intense competition, and soaring production costs due to the rupiah’s depreciation to Rp 16,751 per US dollar.
The Federation of Indonesian Metal Workers Unions (KSPI) recorded more than 40 factory closures as of August, leaving 70,000 workers without a livelihood. Sritex laid off 11,025 workers, Yamaha Music Piano reduced 1,110 jobs, and Danamtex and Dupantex in Pekalongan were forced to close factories. Each factory closure not only lost jobs but also impacted purchasing power in the surrounding areas.
It’s no surprise that banking institutions are also affected. Credit growth, which had reached 10.9% last year, has now slowed: from 8.1% in May 2025, to 7.6% in June, and even further sluggish at 7.56% in August. Bank Indonesia’s Governor Perry Warjiyo explained, “These include the wait-and-see attitude of economic actors, as well as the persistence of high credit interest rates. This resulted in a substantial amount of undisbursed loan facilities in August, amounting to Rp 2,372.1 trillion, or 22.7% of the available credit ceiling.”
On the other hand, liquidity issues have plagued many banks. Over the past few years, public funds have been drawn into Government Bonds (SBN) and Bank Indonesia Rupiah Securities (SRBI) with attractive yields. As a result, banks have lost a source of low-cost funding. It was recorded that 23 banks even had a loan-to-deposit ratio (LDR) above 100%, meaning that loans exceeded deposits. The Rp 200 trillion injection from the Government through the Association of State-Owned Banks (Himbara) provided some relieves, although initially it was more to cover the drought in the interbanks market than directly into real sector financing.
Purbaya reiterated the urgency: “The Government funds, partly derived from debt, left idle while the banking system experiences a drought, causing the real sector to stagnate. This could create an economic trap, just waiting to fall into if it is not quickly corrected. If it is corrected, economic growth can reach 6% or 6.5%, especially if we improve the other engines.”
Political Strategies to Boost 8% of Economic Growth
Politically, Prabowo is in the strongest position in post-reform history. With 95 million votes, or 58.6% of the valid national vote, coupled with the support of a majority of political parties, his government enjoys virtually no opposition. “The Government has almost no opposition; the entire parliament supports it. It’s politically strong, but economically weak,” said Burhanudin Muhtadi, Director of Indonesian Political Indicators, in a discussion with Infobank at the end of September.
However, politics isn’t everything. Infobank Research Bureau emphasizes that Indonesia’s main problems are poverty and inequality. According to the World Bank, 171.8 million people, or 60.3% of the population, are categorized as poor, far higher than the Central Statistics Agency (BPS) figure of only 23.85 million. This data gap demonstrates a divergence in perspectives and emphasizes that political success does not automatically address welfare issues.
Since the Jokowi era, The Government’s debt has increased sharply from Rp 2,608 trillion (2014) to Rp 8,680 trillion (2024). State-owned enterprises (SOEs) are also increasingly burdened with debt despite receiving Rp 424 trillion in state capital injections. Ironically, the net dividend to the state is only Rp 72 trillion. Under these conditions, a policy direction that prioritizes political interests over economic ones is clearly risky.
Infobank believes that to achieve the 8% growth target, the Government must reverse its priorities: economics over politics. The cabinet needs to be filled with professionals, not just party representatives. The state budget must be directed toward welfare, not political interests. Besides, SOEs must become profit centers, not mere state instruments bearing political burdens.
History offers lessons. During President Yudhoyono’s administration, GDP grew an average of 5.71% per year, with several instances exceeding 6%. The Rp 1,000 trillion fuel subsidy at the time was controversial, but it was proven to boost consumption, mobility, and bank credit, which grew by an average of 21.5% per year. In contrast, the Jokowi era recorded growth of only 4.21%, with credit slowing and the manufacturing industry’s contribution to GDP continuing to shrink.
Therefore, Prabowo’s economic policy direction must be clear: providing space for the private sector, creating domestic demand, and strengthening the role of state-owned enterprises. With substantial political capital, the Government should prioritize the economy as its primary concern, not merely as an instrument of power.
The gap between political strength and economic weakness is now a major challenge for the Prabowo administration. Purbaya’s new strategy of diverting Rp 200 trillion in liquidity to banks is indeed a bold move, but it does not automatically resolve structural problems: weak purchasing power, the collapse of labor-intensive industries, and the loss of energy of the domestic market.
If political strategies continue to be more dominant than economic ones, the 8% growth target will remain a dream. However, if the focus shifts to strengthening the real sector, market demand, and the role of the private sector as the main driver of the economy, Indonesia can escape the 5% growth trap.
As Purbaya emphasized: “If we improve [the economic situation], our economic growth may reach 6% or 6.5%, especially if we improve the other engines.”
The middle class, which has shrunk by 1.2 million people annually since 2019, is increasingly squeezed. They must bear a heavier tax burden amid rising prices for necessities. In contrast, public officials appeared insensitive, for example, when legislators danced for joy after the announcement of a Rp 50 million per month increase in housing allowances. This action deepened public disappointment towards the Government.
