Indonesian Stocks Plunge; Economist Urges Government to Restore Market Confidence

Indonesia's capital market is facing significant pressure, causing concern for national economic stability. The Composite Stock Price Index (IHSG) has plummeted from 9,200 to 5,900, approaching the lows experienced during the 2008 global financial crisis. This downturn has affected major bank stocks, including PT Bank Central Asia Tbk (BCA).

The decline is attributed to foreign investors pulling funds from the domestic market. This exodus stems from a waning confidence in the economic outlook and the government's policies. Senior economist Didik J. Rachbini warned the government against underestimating the severity of the situation.

Despite Bank Indonesia's interventions in the financial markets, the rupiah exchange rate remains under pressure, and the stock market shows no strong signs of recovery. "The economy is not just about good growth numbers on paper. What is collapsing now is investor confidence. We need a sense of crisis from the government," Didik stated.

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The economy is not just about good growth numbers on paper. What is collapsing now is investor confidence. We need a sense of crisis from the government.

Didik drew parallels to past warnings, highlighting that economic recovery is impossible without legal certainty, policy consistency, and prudent management of the state budget. He cautioned that if the government continues to allow state spending to balloon for new programs without adequate evaluation, while the parliament merely approves them, investors will likely continue to shy away from the domestic market. This capital outflow could further pressure the rupiah due to increased demand for U.S. dollars.

"The key lies in legal certainty and budget governance. If market confidence returns, then the community's economy can also recover," Didik concluded.

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The key lies in legal certainty and budget governance. If market confidence returns, then the community's economy can also recover.