Indonesia’s New Deal

Indonesia is on the brink of unveiling a fresh economic stimulus package on 5 June, aimed at bolstering household consumption and shoring up national growth. Coordinating Minister for Economic Affairs Airlangga Hartarto said the initiative is designed to sustain public purchasing power and inject momentum into the economy. The measures underscore Jakarta’s reliance on domestic demand as a growth engine amid an increasingly uncertain global outlook.

Crisis Control in the Archipelago

Indonesia, Southeast Asia’s biggest economy, is entering a delicate phase. Weighed down by weakening domestic demand and slowing external markets, the country reported a GDP growth rate of 4.87% in the first quarter of 2025—its slowest pace in three years. The country’s central bank has downgraded its annual growth forecast from an earlier range of 4.7–5.5% to a slightly more cautious 4.6–5.4%. In the face of this bit of economic malaise, Jakarta has rolled out a comprehensive stimulus package designed to revive consumption and re-energise the national economy.

The government’s plan includes a slate of fiscal incentives and subsidies aimed at directly supporting low-income households. These include a 50% discount on electricity bills for roughly 79.3 million households, food aid for 18.3 million poor families during June and July, and a lowering of occupational accident insurance premiums. Jakarta is also offering a direct cash subsidy of seven million rupiah (around $430) for the purchase of electric motorcycles. Wage subsidies will be granted to workers earning less than 3.5 million rupiahs (about $215)—below or equal to provincial minimum wages—encompassing even informal educators such as volunteer teachers.

In an effort to invigorate tourism and related services, the government has announced toll road discounts for 110 million users throughout June and July. These will be coupled with temporary tax breaks on tickets for air, rail, and sea travel during the national school holidays, which run until mid-July. The Ministry of Economic Affairs is aiming for a GDP growth rate of 5% this quarter, looking to household consumption as the principal mover. Local governments are being urged to organise public entertainment events and promote domestic tourism to boost mobility and consumer spending.

Diplomacy Meets Development

Jakarta’s stimulus push comes against a broader backdrop of diplomatic manoeuvring and regional alignment—chiefly, a rekindled partnership with Beijing. As Indonesia and China mark the 75th anniversary of their diplomatic ties, both governments have reaffirmed their shared commitment to the Spirit of Bandung—a reference to the 1955 Asian-African Conference that became a defining moment for the postcolonial Global South.

From 24-26 May, Chinese Premier Li Qiang paid an official visit to Indonesia, where he and President Prabowo Subianto presided over a series of agreements aimed at deepening cooperation in trade, agriculture, investment, and tourism. The two leaders also attended a commemorative exhibition on the Bandung Conference’s 70th anniversary, with Premier Li describing the present day as “another crucial turning point for the world.”

More than symbolism is at play. China and Indonesia pledged to enhance collaboration across five pillars: political coordination, economic synergy, cultural and people-to-people exchanges, maritime affairs, and security. These items align closely with China’s Belt and Road Initiative, which Jakarta increasingly sees not only as an infrastructure booster but also as a stabilising force for Southeast Asia’s geopolitical landscape.

From Coal to Kilowatts

Perhaps the most audacious component of Indonesia’s long-term strategy lies in its planned shift to nuclear energy. Jakarta’s first experiment with nuclear energy dates to February 1965. Today, the country relies heavily on its abundant coal reserves, a cheap but polluting energy source. While Indonesia operates three research reactors, it still lacks a nuclear power plant for commercial electricity generation.

According to Bahlil Lahadalia , Minister of Energy and Mineral Resources, the first full-scale nuclear power plant is set to be built on the island of Borneo and will become operational between 2030 and 2032. Other nuclear power plants will be constructed farther outside Java, the archipelago’s economic heartland, in a bid to stimulate the poorer eastern and central regions and to be closer to energy-intensive mining operations.

The goal is ambitious: to eliminate coal-fired power within 15 years and achieve net-zero emissions by 2050. Experts have expressed skepticism, citing Indonesia’s patchy record on large infrastructure delivery and the high upfront costs of nuclear energy. Yet the administration insists that without nuclear power, the country will struggle to meet rising electricity demand or its climate targets.

President Prabowo, however, remains characteristically bullish. He has promised Indonesians a future of energy security and economic stability, blending short-term stimulus with long-term structural reforms. Indonesia could emerge not only as a revitalised economy but as a model of balanced development. But between ambition and implementation lies a gulf that only effective governance can bridge.

Statement

Indonesia’s stimulus plan is more than a short-term fix: it is a bold bet on domestic consumption, coupled with diplomatic alignment and nuclear ambition. By cushioning households and courting Beijing, Jakarta seeks to reboot growth while positioning itself as a central player in the regional economic order. Furthermore, the nuclear push signals a long-term ambition for the country. If Prabowo’s government can convert promises into policy, Indonesia may not only reignite its economy but redefine what an emerging power can achieve when pragmatism meets political vision. The moment demands follow-through, though. Without structural reform and accountability, stimulus alone will not sustain Indonesia’s economic momentum.

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