Indonesia: investors lose faith as Prabowo doubles down

The latest sharp falls in Indonesia’s financial markets reflect growing concerns that President Prabowo is doubling down on his populist and interventionist approach to policymaking. The central bank will probably deliver further interest rate hikes in the near-term but, so long as the government remains on the current policy path, this is unlikely to be sufficient to prevent a further widening of risk premia on Indonesian assets and a deterioration in the economy’s long-term prospects.