The wave of large-scale demonstrations and riots that occurred over the past weekend has affected Indonesia’s national economy, undermined market confidence, and raised international concerns, with several countries issuing travel warnings for Indonesia.
UGM economist Dr. Denni Puspa Purbasari explained that the decline in market confidence and economic slowdown is a natural consequence of the protests. Stable social and political conditions, she emphasized, are essential foundations for economic growth.
“For the economy to grow, political stability is necessary, as was emphasized in the Development Trilogy during President Soeharto’s era,” she told reporters on Thursday (Sep. 4) at the Faculty of Economics and Business, Universitas Gadjah Mada (FEB UGM).
According to Dr. Purbasari, the development concept was built on three interlinked pillars: dynamic national stability, high economic growth, and equitable development and distribution of its benefits. The close connection among these three pillars, she noted, remains relevant in Indonesia’s current development framework.
Market confidence, she explained, can be observed from the Composite Stock Price Index (IHSG). During the peak of the demonstrations, from Thursday (Aug. 28) to Monday (Sep. 1), the IHSG fell by 2.7%, from 7,952.09 to 7,736.07, equivalent to a market loss of approximately Rp385–391 trillion.
“This reflects declining confidence among market players in Indonesia’s economic prospects, while perceived risks have increased,” she said.
Dr. Purbasari observed that the current social and political conditions have weakened market trust in the Indonesian business climate overall. The risks are systemic, reflected in IHSG movements. However, she noted that not all stocks declined, as certain sectors or companies experienced positive catalysts during the same period.
In the midst of this uncertainty, she stressed that business actors must endure and mitigate risks. Large corporations are generally better positioned due to their management systems, networks, capital, and protective instruments such as insurance.
“Small and medium enterprises (SMEs) that depend on daily income are the most vulnerable. If they close for three days, it means no income at all, equivalent to 10% of their monthly turnover,” she explained.
She added that such economic downturns, particularly in relation to the IHSG, are not unprecedented. Major events such as the 212 demonstration also affected the political, economic, social, and cultural spheres, though with different intensity compared to the present. The 1998 multidimensional crisis, for example, saw the IHSG plunge by more than 50%.
Beyond government action, she emphasized the role of households in maintaining economic resilience. Dr. Purbasari advised the public to carefully manage household spending and income. In times of uncertainty, people are encouraged to prioritize essential needs and save for emergency funds.
“Indeed, this will slow down the economy. However, such measures are unavoidable,” the expert cautioned.
Author: Hanifah
Editor: Gusti Grehenson
Post-editor: Salma
Illustration: Freepik