President Takes Over Fiscal Stage, Market Begins Sending Warning Signals

The upcoming presentation of the 2027 State Budget Framework (KEM-PPKF) by President Prabowo Subianto himself marks a significant departure from tradition, signaling a strong presidential hand in steering the nation's fiscal direction. Historically, this crucial document, outlining macroeconomic projections and fiscal policies, has been presented by the Minister of Finance, reflecting a more technocratic approach to budget preparation. This change, as noted by economists, places the fiscal agenda firmly within the President's political priorities.

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In budget politics, a symbol like this is important because it signals that fiscal priorities are not just administrative, but also part of the main political agenda of the government.

Yusuf Rendy Manilet, an economist at CORE Indonesia, points out that while the President constitutionally holds ultimate authority over fiscal policy, the manner of its announcement carries considerable weight. Presenting the budget's priorities in the highest political arena suggests that fiscal decisions may be driven more by political momentum than by rigorous, independent technocratic review. This shift has not gone unnoticed by the market, which is beginning to signal caution.

The Indonesian stock market (IHSG) has experienced a notable correction, and the rupiah has weakened against the dollar, while regional bourses have remained more stable. This divergence suggests that domestic factors are increasingly influencing investor sentiment, raising the perceived risk associated with Indonesia. Rumors of potential new commodity export bodies, even without official confirmation, have contributed to this unease, highlighting a market demand for clear, detailed communication from the government.

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The market is starting to question whether the policy-making process is still based on thorough studies or is moving too quickly to follow political momentum.

Manilet emphasizes that the core issue for the market is not necessarily policy changes themselves, but the uncertainty surrounding their formulation and implementation. Investors are more receptive to clear policy directions, consistent communication, and well-understood design frameworks. When significant policy ideas emerge without open deliberation or prior consultation with stakeholders, it can lead to negative assumptions and increased market volatility. This situation underscores the delicate balance between political agenda-setting and maintaining market confidence through transparent and predictable governance.

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The main problem is not solely the substance of the policy, but the uncertainty of the process.