By Maria Rina Santoso, South East Asia Correspondent
As Indonesia enters 2025, the nation faces a delicate balance between political maturation and economic uncertainty. Protests against a planned increase in value-added tax (VAT) from 11 to 12 per cent, set to take effect early in the year, have already highlighted growing public discontent. While 2024 ended on a relatively stable note with peaceful elections, emerging tensions—stemming from domestic rivalries and global trade dynamics—could test the resilience of President Prabowo Subianto’s administration. This analysis explores the interplay of these factors, offering a cautious outlook on Indonesia’s democratic progress and economic ambitions.
The Legacy of 2024: Elections and Democratic Maturity
Indonesia’s 2024 electoral cycle, encompassing both presidential and regional polls, marked a pivotal moment in the country’s democratic evolution. The February presidential election saw Prabowo Subianto, a former defence minister, ascend to the presidency amid allegations of resource-heavy campaigning by the incumbent government. Despite heated debates and accusations of potential irregularities—such as vote-rigging and meddling—the process concluded without major disruptions, as winners and losers opted for legal recourse through the Constitutional Court. 
This outcome suggests a maturing democracy, where institutional mechanisms are increasingly favoured over street-level confrontations. The October regional elections further reinforced this trend, with an opposition candidate securing victory in Jakarta, even as Prabowo’s new administration began its tenure. Inaugurated on 20 October 2024, Prabowo quickly outlined ambitious goals, including achieving 8 per cent economic growth, launching a nationwide free meals programme, and extending policies from his predecessor, Joko Widodo, such as industrial downstreaming.
However, questions linger about the integrity of these processes. Reports from trusted sources, including Reuters, indicate that the election’s heavy reliance on government resources may have influenced outcomes, though no evidence has confirmed outright misconduct. If substantiated, such influences could erode public trust, but for now, the peaceful resolution serves as a positive indicator of Indonesia’s political stability.
Prabowo’s Early Moves: Domestic Promises and International Debut
Upon taking office, Prabowo wasted no time in projecting an image of global engagement. His inaugural international tour, commencing shortly after his swearing-in, included stops in Beijing and Washington, DC, followed by attendance at multilateral summits where he interacted with world leaders like Russian President Vladimir Putin, Brazilian President Luiz Inácio Lula da Silva, and Turkish President Recep Tayyip Erdogan. These diplomatic efforts aimed to bolster Indonesia’s position as a key player in the Global South, fostering trade ties and seeking investment to support his growth targets.
Domestically, Prabowo’s agenda builds on Jokowi’s legacy, emphasising economic self-sufficiency through policies like downstreaming, which seeks to add value to Indonesia’s natural resources before export. The free meals programme, designed to address food security and poverty, has been widely publicised as a cornerstone of his administration. Yet, as analysts from the Jakarta Post have noted, implementing these initiatives amid fiscal constraints could prove challenging.
Economic Pressures: The VAT Hike and Global Trade Risks
Turning to the economy, 2025 begins with potential headwinds that could undermine Prabowo’s 8 per cent growth pledge. The government’s decision to raise VAT from 11 to 12 per cent, effective from January 2025, has sparked widespread protests, as seen in Jakarta on 26 December 2024. Students and citizens voiced concerns that the increase would erode purchasing power, particularly for low-income households, potentially stifling consumption and investment.
Economic experts, drawing from data by the World Bank and Indonesian government reports, estimate that such a tax adjustment might reduce growth by 0.5 to 1 per cent if not offset by other measures. For instance, if the VAT hike leads to decreased consumer spending, as suggested by preliminary surveys on X (formerly Twitter) from accounts like @EconomyID, it could exacerbate inflation. However, these projections remain speculative; no definitive evidence from primary sources, such as Bank Indonesia’s official forecasts, confirms the extent of the impact.
Compounding these domestic challenges are international factors, notably the re-election of Donald Trump in the US. His pledges to impose higher tariffs on China threaten to ignite a trade war, which could disrupt Indonesia’s export-dependent economy. As a nation with significant trade links to both the US and China, Indonesia may face supply chain disruptions and reduced demand for its commodities. If Trump’s policies materialise, Prabowo’s growth ambitions could be jeopardised, though current analyses from Reuters suggest that Indonesia’s strategic neutrality might mitigate some risks.
Rising Political Tensions: The KPK and Party Rivalries
On the political front, the post-election calm has given way to renewed friction. A notable flashpoint emerged on Christmas Eve 2024, when the Corruption Eradication Commission (KPK) named Hasto Kristiyanto, secretary general of the Indonesian Democratic Party of Struggle (PDI-P), as a suspect in a bribery case. This move, widely perceived as politically charged, is believed to stem from backing by former President Jokowi, who has clashed with the PDI-P following the expulsion of himself, his son Vice President Gibran Rakabuming Raka, and son-in-law Bobby Nasution from the party.
Such developments raise the spectre of institutional weaponisation, where anti-corruption bodies might be influenced by political agendas. While no evidence directly links Jokowi to the KPK’s actions, the timing and context suggest potential motives. If confirmed through independent investigations, this could erode the KPK’s credibility and heighten partisan divides. Analysts on platforms like @ConstitutionNet have highlighted that these tensions may intensify in early 2025, potentially leading to legislative stalemates or further protests.
A truce between Jokowi and the PDI-P remains a slim possibility, as both sides engage in tit-for-tat manoeuvres. This scenario underscores the fragility of Indonesia’s coalition-based politics, where personal rivalries can overshadow national interests. For global readers, it is worth noting that the PDI-P, as the largest opposition party, plays a crucial role in Indonesia’s multi-party system, akin to major coalitions in other democracies.
In-Depth Analysis: Prospects for Stability and Reform
Looking ahead, Indonesia’s path in 2025 hinges on navigating these intertwined challenges. Politically, the country’s ability to maintain democratic norms will be tested by ongoing rivalries and public scrutiny of institutions like the KPK. If reforms—such as strengthening anti-corruption measures—reduce political interference, they may foster greater stability. However, estimates of such outcomes are unconfirmed, and no evidence currently supports claims of widespread malpractice.
Economically, achieving 8 per cent growth will require deft management of fiscal policies and international relations. The VAT increase, while intended to boost revenue, may result in short-term pain for long-term gains, such as funding social programmes. Yet, if global trade tensions escalate, Indonesia could face setbacks, potentially affecting employment and inequality. This analysis adopts a conditional approach: if Prabowo’s administration successfully diversifies trade partners, as hinted in his diplomatic tours, the risks might be minimised, though such strategies remain in early stages.
Culturally, Indonesia’s diverse ethnic and regional landscape demands sensitive governance. Policies must account for the needs of its multi-ethnic south and other areas, avoiding any perception of bias. Overall, while 2024 demonstrated resilience, 2025 offers both opportunities for progress and pitfalls for division. Optimism is warranted, but only if leaders prioritise unity over conflict.
Indonesia stands at a crossroads, with political maturity and economic ambition clashing against immediate hurdles. As the nation moves forward, balanced leadership will be essential to harness its potential.
