Not All Pressures End in Crisis: Indonesia's Economic Foundations Are Still Working

In the past few months, public discourse in Indonesia has been filled with various pessimistic narratives about the national economy. Rupiah depreciation, price rises for several essential goods, pressures on the manufacturing sector, and global uncertainty have sparked concerns that Indonesia is moving toward a crisis as large as 1998.

On social media, extreme predictions circulate quickly: the rupiah would collapse, the economy was heading for ruin, and national resilience was said to be weakening.

These concerns should not be ignored. The public is indeed facing real economic pressures. Certain food prices have risen. Some micro, small and medium enterprises (MSMEs) are experiencing weaker purchasing power.

Manufacturing industries face challenges due to global trade slowdowns and rising production costs. The depreciation of the rupiah against the US dollar also heightens public concern about macroeconomic stability.

The question is: is Indonesia really heading toward a crisis? In my view, the answer is not that simple.

Economic pressures are real, but not every pressure automatically ends in a crisis. In economics, what often matters is not whether there is pressure, but how strongly a country’s capacity to absorb shocks without losing stability.

That is where context becomes important. Comparing the current conditions to the 1998 crisis is an oversimplification that is not proportional, because Indonesia’s economic structure today differs markedly from nearly three decades ago.

The global situation today is also very different. The world is in a phase of heavy, simultaneous pressures. High interest rates in the United States continue to drain capital flows to developing countries. Geopolitical conflicts in the Middle East increase the risk of global energy price spikes.

Global trade is slowing. Many currencies around the world have weakened against the US dollar. Even some advanced economies face stagnating growth and significant fiscal pressures. In other words, economic pressures are not unique to Indonesia. The world is indeed in a period of major turbulence.

In such a context, a more relevant question is not whether Indonesia faces pressure, but whether its economic foundations remain intact when pressure hits. So far, various indicators show that the answer remains relatively positive.

Statistics Indonesia (BPS) records Indonesia’s economic growth in the first quarter of 2026 at 5.61 per cent year-on-year (y/y). The figure surpassed market expectations and was among the highest growth rates in the last 12 quarters.

But more importantly, the growth was not supported by a single sector. Household consumption grew by 5.52 per cent, investment rose by 5.96 per cent, and government spending accelerated significantly by 21.81 per cent. The accommodation and food services sector grew by 13.14 per cent, while trade, transport, and manufacturing also remained positive.

Economic growth does not automatically mean that all segments of society are prosperous. Yet at the same time, the slowdown in purchasing power is not yet showing signs of broad-based economic contraction.

Persistent household consumption indicates that economic activity among the public remains underway. Hotels and restaurants staying busy illustrate ongoing mobility and spending by the public. Rising investment also shows that the business sector has not entirely lost confidence in the domestic economic outlook.

This is where a common misreading of the economic situation often arises. For example, rupiah depreciation is frequently and directly associated with a crisis signal. Yet in an open economy, a currency’s weakness often better reflects global capital shifts driven by changes in international interest rates rather than a collapse of domestic fundamentals.

Rupiah, citing data from the Jakarta Interbank Spot Dollar Rate (Jisdor), indeed touched Rp17,514 per US dollar on 12 May 2026, driven by a combination of global pressures, capital outflows, and growing geopolitical uncertainty. However, it is important to understand that currency pressures also occur in many other developing countries as a result of a strong US dollar and high global interest rates.

In such a situation, what differentiates matters is not merely whether a currency has weakened, but whether a country still has the capacity to maintain stability when pressure hits. To date, Indonesia’s policy response has been relatively adequate.

Bank Indonesia continues to actively intervene in the foreign exchange market to keep rupiah volatility from developing into financial panics. Indonesia’s foreign exchange reserves remain around US$146 billion, providing an essential buffer for external stability. At the same time, the national banking system remains relatively stable and shows no signs of systemic collapse as occurred in 1998.

The same is true for inflation. Many assume that low inflation always means strong purchasing power. In certain conditions, that assumption is not always correct. Very low inflation can sometimes reflect weak domestic demand.

In the current Indonesian context, April 2026’s annual inflation of about 2.42 per cent indicates a relatively healthier situation: price pressures are contained, but domestic consumption continues to grow. This is important because many countries face a far more difficult combination: growth slowing while inflation remains high.

At the same time, Indonesia’s trade balance still recorded a surplus of around US$3.32 billion in March 2026. This means Indonesia’s external sector still has a good cushion to support macroeconomic stability.

In an open economy such as Indonesia,