In recent weeks, growing concerns over Indonesia’s economic direction have become increasingly difficult to ignore. Businesses complain about rising costs amid policy uncertainty. Parts of the middle class are beginning to cut back on spending. Investors remain in “wait-and-see” mode. Meanwhile, academics and the broader public are asking a question that is becoming more frequent in policy discussions: do official macroeconomic narratives still reflect what many Indonesians actually experience in daily life?

Such concerns should not be dismissed lightly. In economics, perception and trust often matter as much as the numbers themselves.

On paper, several indicators still appear reasonably solid. Indonesia’s economy reportedly grew by 5.61% year-on-year in the first quarter of 2026, while investment realization remained relatively strong. Yet at the same time, purchasing power is visibly weakening, living costs continue to rise, and many private sector players appear to be shifting from expansion mode into defensive mode.

This apparent contradiction is not unusual in modern economies. Strong headline growth can coexist with weakening public confidence. Households may postpone consumption even when macroeconomic indicators appear stable. Businesses may delay investment not because opportunities no longer exist, but because policy direction increasingly feels difficult to predict. Indonesia’s challenge today, therefore, is not merely about maintaining growth. The more fundamental challenge is preserving policy credibility and restoring public confidence.

Trust remains one of the most important foundations of economic stability. When the public believes in the direction of policy, consumption continues, investment flows remain resilient, and markets tend to show greater patience during periods of pressure. But once doubts begin to spread, economic actors naturally become more defensive. Consumption weakens, investment is delayed, and volatility becomes easier to trigger. In such circumstances, governments need to prioritize not only economic measures, but also credibility-building measures.

One immediate priority is improving transparency and consistency in public communication. Amid growing questions surrounding various economic indicators, the government needs to create a more open and credible communication space involving academics, businesses, and independent experts. Clear explanations of statistical methodology, better coordination among economic authorities, and more coherent public messaging are essential to reduce speculation and uncertainty. Credibility is not built through denial, but through openness and consistency.

Equally important, public communication must remain healthy and constructive. In periods of economic uncertainty, criticism, questions, and differing views should be treated as a normal part of democratic policymaking rather than as threats to authority. Excessively defensive responses or the tendency to label critics risk widening the gap between the government and the public. Trust does not grow through enforced uniformity of opinion, but through the state’s ability to maintain an open, mature, and data-driven dialogue.

At the same time, protecting household purchasing power remains essential. Given limited fiscal space, broad-based subsidies are becoming increasingly expensive and less effective. More targeted and temporary support measures aimed at vulnerable households and lower-middle-income groups would likely provide better results without undermining fiscal sustainability.

However, restoring confidence will require more than short-term stimulus. Businesses and investors also need reassurance that policy predictability remains a priority. In recent months, concerns about sudden regulatory shifts have increasingly surfaced among investors and private-sector actors. For businesses, predictability often matters as much as incentives themselves. Indonesia remains a large market with strong long-term potential. But such potential will only translate into sustained investment if policy direction is perceived as consistent and reliable.

The government should therefore avoid introducing measures that create additional uncertainty or further strain private sector cash flow. Major policy adjustments need to be gradual, properly consulted, and carefully assessed for their broader impact on investment, employment, and business confidence.

At the macro level, stronger coordination between fiscal and monetary authorities will also remain essential to stabilize the rupiah and contain imported inflation. Exchange rate volatility affects not only financial markets, but also directly impacts the real sector through higher import costs and increasing pressure on corporate cash flow.

Beyond short-term stabilization, however, Indonesia still needs a broader long-term agenda. This moment should be used to gradually redirect spending toward areas that genuinely improve national productivity: logistics, energy resilience, workforce skills, and higher value-added industries. Economic resilience cannot rely solely on short-term responses. It ultimately depends on improving efficiency and competitiveness over time.

Indonesia still possesses important underlying strengths. Investment has not collapsed. Financial system stability remains relatively intact. Domestic consumption has slowed, but has not sharply contracted. Yet these buffers are not unlimited. The greatest risk would emerge if uncertainty is allowed to persist for too long while policy responses lose clarity and direction. History has shown that economies can often survive external shocks. What is far more difficult to withstand is the gradual erosion of public trust in policy itself.

Ultimately, the success of economic policy cannot be measured solely by headline growth figures or official macroeconomic claims. The more important question is whether households feel their purchasing power is protected, and whether businesses still believe Indonesia remains a stable and credible place to invest and build long-term partnerships.

That may well become the defining test of Indonesia’s economic governance today.

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Iman Pambagyo is the Trade Ministry’s Director General of International Trade Negotiations (2012-2014, 2016-2020) and Indonesia’s Ambassador to the WTO (2014-2015). The views expressed in this article are those of the author.

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