Indonesia’s Political Maturation Tested: Protests, Economic Reforms, and 2025 Uncertainties

By Maria Rina Santoso, South East Asia Correspondent

In the wake of widespread student protests against a planned increase in the value-added tax (VAT), Indonesia enters 2025 with a mix of democratic gains and mounting challenges. As the nation reflects on a relatively smooth electoral process in 2024, new tensions over economic policies and political rivalries threaten to destabilise the fledgling administration of President Prabowo Subianto. This development underscores the delicate balance between fostering economic growth and maintaining social stability in Southeast Asia’s largest democracy.

Reflections on Indonesia’s 2024 Electoral Success

Indonesia’s 2024 elections marked a pivotal moment in its democratic evolution, with the peaceful conduct of both presidential and regional polls standing as a testament to the country’s maturing political institutions. The February vote, which saw Prabowo Subianto ascend to the presidency, was not without controversy. Accusations of vote-rigging and the influence of the incumbent government’s resources raised eyebrows among observers, yet the process concluded without significant unrest. This outcome, where winners and losers alike turned to the Constitutional Court for resolution, suggests a growing acceptance of legal mechanisms over street-level confrontations.

The subsequent regional elections in October further reinforced this trend. In Jakarta, an opposition candidate’s victory demonstrated the vibrancy of Indonesia’s multi-party system, even as Prabowo’s administration began its term. Inaugurated on 20 October 2024, the new president quickly outlined ambitious goals, including achieving 8 percent economic growth, launching a nationwide free meals programme, and building on former President Joko Widodo’s policies such as industrial downstreaming. These pledges, while inspiring, have already faced scrutiny as the realities of governance set in.

Prabowo’s early international engagements, including visits to Beijing, Washington, and participation in multilateral summits with leaders like Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan, aimed to position Indonesia as a key player in global affairs. Such diplomacy could bolster Indonesia’s economic prospects, particularly through strengthened trade ties. However, as with any new leadership, the initial optimism is now giving way to tangible tests.

Economic Headwinds: The VAT Hike and Its Implications

At the heart of recent unrest is the government’s decision to raise the VAT from 11 percent to 12 percent, effective from the beginning of 2025. This move, intended to boost state revenues amid fiscal pressures, has sparked protests across major cities, including Jakarta. On 26 December 2024, students clashed with riot police in demonstrations that highlighted public discontent over potential increases in living costs. While the policy is framed as a necessary step for funding social programmes, critics argue it could erode consumer purchasing power at a time when the economy is already vulnerable.

Analysts suggest that this tax adjustment might hinder economic growth, with estimates indicating a possible slowdown in 2025. If the VAT increase leads to reduced spending, as some models predict, it could complicate Prabowo’s target of 8 percent growth. Moreover, external factors, such as the re-election of Donald Trump in the United States and his pledges to impose tariffs on China, add another layer of uncertainty. Indonesia, as a trading partner of both nations, may find itself navigating a complex web of supply chain disruptions and trade barriers. Should a US-China trade war escalate, it might indirectly affect Indonesian exports, potentially derailing the president’s economic agenda.

It is important to note that these projections remain speculative. While sources indicate potential risks, no definitive evidence confirms the full extent of economic impacts at this stage. If reforms are implemented effectively, they may mitigate these challenges; however, without concrete data, such outcomes should be viewed as conditional.

Rising Political Tensions and the Risk of Instability

Beyond economics, 2025 looms as a year of heightened political drama. The Corruption Eradication Commission (KPK) recently named PDI-P secretary general Hasto Kristiyanto as a suspect in a bribery case, a development perceived by many as politically motivated. This action, occurring shortly after the expulsion of former President Jokowi and his family from the PDI-P, has fuelled accusations of retribution. Jokowi, whose influence remains significant, is seen by some as orchestrating moves against his former allies, though no evidence substantiates these claims.

Such events illustrate the fragile truce in Indonesian politics. The PDI-P, a major opposition force, and Jokowi’s circle appear locked in a tit-for-tat dynamic that could escalate in the coming months. A truce between these factions might stabilise the political landscape, but given the history of rivalries, this seems unlikely. If tensions intensify, they could manifest in further protests or legislative gridlock, testing the resilience of Indonesia’s democratic institutions.

In this context, the role of civil society and media remains crucial. Protests like those on 26 December 2024 serve as a barometer of public sentiment, with participants demanding greater transparency and accountability. For Indonesia, a nation with a diverse ethnic and religious fabric, maintaining unity amid such divisions is essential. The government’s response, including the deployment of riot police, must be handled with sensitivity to avoid exacerbating social fractures.

International Context and Indonesia’s Geopolitical Role

Prabowo’s international tour in late 2024 positioned Indonesia as a bridge between East and West, particularly in dealings with China and the US. His meetings with global leaders underscore Indonesia’s aspirations in forums like ASEAN and the G20. However, the incoming Trump administration’s policies could challenge this balancing act. If tariffs on Chinese goods increase, Indonesia might benefit from redirected trade flows, but it could also face pressure to align more closely with one side, potentially straining diplomatic relations.

Analytically, if confirmed economic pressures from global trade dynamics affect Indonesia, they may prompt policy shifts in Jakarta. Yet, as with domestic speculations, these scenarios require disclaimers: no evidence currently confirms direct links between US policies and Indonesian growth figures. Prabowo’s administration has expressed optimism, emphasising diversification strategies to weather such storms.

Looking Ahead: Opportunities Amid Challenges

Despite these uncertainties, there are grounds for optimism. Indonesia’s ability to conduct peaceful elections and integrate opposition voices into governance signals a maturing democracy. The free meals programme and industrial policies, if executed well, could address inequality and drive sustainable growth. As the nation marks the new year, stakeholders from government to civil society must prioritise dialogue to navigate the road ahead.

2025 presents Indonesia with a critical juncture. The interplay of economic reforms, political rivalries, and global influences will shape its trajectory. By fostering inclusive policies and transparent processes, the country can build on its recent successes and mitigate emerging risks.