Foreign Capital Still 'Wait and See' on Entering Indonesia, Economist Cites Reasons

Foreign capital inflows into Indonesia have yet to return to pre-Covid-19 levels. Meanwhile, Indonesian residents’ funds held abroad reached $25.70 billion in 2025, exceeding foreign capital inflows of $21.68 billion over the same period.

Data from Bank Indonesia’s Balance of Payments shows net foreign capital inflows in financial transactions amounted to $21.68 billion in 2025, with $4.21 billion recorded in Q1 2026. Conversely, net outflows of Indonesian residents’ capital reached $25.70 billion in 2025 and continued at $9.14 billion in Q1 2026.

Bright Indonesia economist Awalil Rizky stated this indicates Indonesian residents’ capital outflows have surpassed foreign capital inflows. ‘Foreign capital is still reluctant to enter as usual, adopting a ’wait and see’ stance,’ he said in research cited on 1 June 2026.

According to Bank Indonesia data, foreign capital inflows in 2025 continued a trend since 2020, remaining well below pre-pandemic levels when inflows hit $51.90 billion in 2019. Simultaneously, Indonesian residents’ capital outflows exceeded inflows in 2025—a phenomenon last seen in 2008 and 2022 over the past two decades.

‘At the same time, residents’ capital continues to flow out significantly,’ Awalil noted.

In Indonesia’s Balance of Payments financial transactions, capital flows are categorised into direct investment, portfolio investment, and other investments. Each category records foreign capital entering Indonesia and Indonesian residents’ capital held abroad.

For direct investment, foreign capital inflows reached $22.28 billion in 2025 and $3.13 billion in Q1 2026. Direct investment relates to long-term interests, including new factory construction, production capacity expansion, new business establishment, or share purchases allowing investor management participation.

Awalil said foreign direct investment inflows in recent years remain below pre-pandemic levels. ‘Foreign direct investment inflows since 2020 have been relatively lower compared to the pre-Covid era,’ he said.

Meanwhile, Indonesian residents’ direct investment abroad has increased since 2022 and continued into Q1 2026.

In portfolio investment—which includes equities, corporate bonds, and Government Securities (SBN)—foreign capital recorded a net outflow of $6.77 billion in 2025. This is unusual as portfolio investment outflows only occurred in 2022 and 2025 over the past two decades. In Q1 2026, foreign portfolio investment returned with inflows of $2.43 billion.

Indonesian residents’ portfolio investment abroad recorded outflows of $2.60 billion in 2025 and $1.70 billion in Q1 2026. ‘Outflow values have trended upward in recent years,’ Awalil said.

Other investment categories, including trade credits, loans, and bank deposits, also showed significant movements. In 2025, other investments from foreign capital recorded inflows of $8.27 billion, but in Q1 2026, they recorded outflows of $1.05 billion.

Conversely, other investments by Indonesian residents abroad recorded outflows of $17.22 billion in 2025 and $6.75 billion in Q1 2026. As a result, net other investment outflows in Q1 2026 were $7.8 billion, while for 2025, they totalled $8.95 billion.

‘The most common transactions in this category are deposits in financial institutions,’ Awalil explained.

He noted that 2025 and Q1 2026 financial transaction data indicate concerning capital flow trends. ‘The financial transaction conditions in 2025 and Q1 2026 indicate poor prospects for Indonesia’s external resilience,’ he said.

According to Awalil, the situation is marked by foreign capital inflows not returning to pre-pandemic levels and high resident capital outflows. ‘Foreign capital remains reluctant to enter as usual, adopting a ’wait and see’ stance, while residents’ capital continues to flow out significantly,’ he added.

Awalil added that risk perception is a key factor for capital owners in investment decisions. ‘Capital owners will weigh security and returns more carefully in uncertain conditions, including government policies and other economic authorities,’ he said.