Indonesia's Economy Receives Positive Signals but Foreign Funds Remain Scarce: A Snapshot of the Current Capital Market

Positive signals from international institutions and global investors towards Indonesia’s economic prospects are strengthening. This follows Finance Minister Purbaya Yudhi Sadewa’s meetings with the International Monetary Fund (IMF), World Bank, rating agencies, and several global investors in Washington DC, United States (US). Indonesia is assessed as capable of maintaining a balance between accelerating economic growth and fiscal prudence under the Prabowo Subianto administration. This assessment serves as an important signal for financial markets, particularly amid ongoing global dynamics overshadowed by uncertainty. Purbaya is optimistic that this confidence will soon translate into foreign capital inflows (capital inflow) domestically, both into fixed-income instruments and the stock market. “It should not be long before (capital flows) enter Indonesia and push the Indonesian capital market to a higher level,” Purbaya stated in a short video, quoted from an official statement on Thursday (16/4/2026). However, behind this positive sentiment, the realisation of foreign investment in the short term is still facing significant challenges. Indef economist Tauhid Ahmad views the government’s meetings with global institutions as important for building positive perceptions, but not yet strong enough to immediately reverse the current trend of capital outflows. The investment realisation target for this year is still under considerable pressure and not fully aligned with the optimism built by the government at the global level. This condition is particularly influenced by external factors that continue to burden international capital movements. The rise in global oil prices is one of the main variables increasing uncertainty, as it directly impacts inflation and production costs in various countries, including Indonesia. “If for this year (investment realisation) it still feels quite heavy actually. Why is this year a bit heavy? I tend to have prospects for next year. First, the global pressure situation affecting us, rising oil prices, trade agreements, including domestic economic weakness, such as the rating issue, which still has influence,” Tauhid said when contacted by Kompas.com on Thursday (16/4/2026). “2026 (economic growth) is still around 5 percent, the highest is 5 percent. So this is still below the government, which targets 5.4 percent,” he explained. Furthermore, Tauhid assesses that the main obstacles to investment in Indonesia actually stem from internal factors. He highlights classic issues such as legal certainty, permitting, and land availability, which remain primary complaints from investors. In addition, the quality of infrastructure and readiness of human resources (HR) are also seen as not yet fully supporting national investment competitiveness. Indonesia’s declining competitiveness ranking indicates that structural reforms still need to be accelerated. This condition directly impacts foreign investors’ risk perceptions in the stock market. Without significant fiscal improvements, foreign fund flows could enter in a limited manner or be short-term in nature. Nevertheless, medium-term prospects remain wide open. If the government can improve policy consistency, enhance governance efficiency, and accelerate infrastructure development, particularly in industrial zones and special economic areas, Indonesia has the opportunity to become an investment magnet in the region. Moreover, ongoing capital market reforms, including increased transparency and improvements in ownership structures, are also assessed as able to enhance the attractiveness of the JCI (Jakarta Composite Index) to global investors.