What's up with Indonesia economic collapse even though the country has a high GDP growth rate?

[u/Skychu768]

IMF October outlook predicted that Indonesia would grow at 5.1%. However, its stock market subsequently crashed amid widespread news of an impending economic collapse.

When I checked the currency exchange rate, it appeared to not be trading

https://www.nytimes.com/2026/10/16/business /indonesia-stocks-economy.html

[u/AutoModerator]

Friendly reminder that all top level comments must:

1. start with "Answer: ", including the space after the colon (or "Question: " if you have an on-topic follow up question to ask),

2. attempt to answer the question, and

3. be unbiased

Please review Rule 4 and this post before making a top level comment:

http://redd.it/b1hct4/

Join the OOTL Discord for further discussion: https://discord.gg/ejDF4mdjnh

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

[u/Party_Application_78]

Answer: GDP growth and stock market performance are basically unrelated short term, the market can tank while the real economy still grows. A selloff like that is usually foreign investors pulling money out on sentiment alone, which hits the rupiah and the index way harder than anything happening on the ground.

[u/mr_beanoz → u/Party_Application_78]

There's also allegations on market manipulation on the stock exchange. Due to this, the MSCI is threatening the stock exchange of Indonesia to be degraded to the "standalone" status by the time of June 2027, making it similar to Russia if it actually happens.

[u/Party_Application_78 → u/mr_beanoz]

Exactly, the MSCI downgrade threat is a huge factor that spooks big institutional money way more than the growth numbers. If that happens, it's basically a liquidity freeze for the whole market.

[u/Curius_pasxt → u/mr_beanoz]

Isnt not an allegation, its fact.

In indonesia social media, its 100% popular to buy a useless stock that been pumped by thousands of % to a really high price so that it included in the MSCI Index. MSCI Index acting as their exit liquidity.

Ofc this will make MSCI pissed off. MSCI Index buyer essentially only buying useless stock.

[u/zonazog → u/Party_Application_78]

I was told that the legal system in Indonesia is very unreliable. That makes financial institutions very wary. Especially on an international level. That means liquidity within the economy is always an issue and can have a greater effect on macroeconomics and the markets than on GDP.

[u/Curius_pasxt → u/zonazog]

Its very unrealible because in order to win indonesia election you need to spend like Billions of $ in campain etc. So when they win, they will try to earn that money back by accepting bribe etc.

[u/zorniy2 → u/Party_Application_78]

Is there a possibility of contagion like the 1997-98 Asian crisis? It started in Thailand, collapsed Indonesia and everyone later. Even South Korea tanked.

[u/BoredM21 → u/zorniy2]

I wouldn't think so. 97/98 was fundamentally a regional systemic issue while Indonesia's current situation is uniquely ours. When the Baht collapsed, investors discovered similar weaknesses throughout the region, causing a chain reaction of currency crises, corporate defaults, and banking failures. By contrast, Indonesia's present problems originate substantially from its own regulatory failures, questionable market practices, and declining policy credibility. In fact, the outflow of foreign capital from Indonesia has and will probably continue flowing into our neighbors.

[u/Curius_pasxt → u/zorniy2]

No. This is Indonesia only, its pretty contained. What more likely happends is the money will go to other country instead. Its like what happening with Argentine.

[u/zorniy2 → u/Curius_pasxt]

That's what they said in 1997 😣

[u/Adept_Analysis_6329]

Answer: Most recent crash was the announcement of process to start the downgrade from ‘emerging’ to ‘standalone’ market. A lot of money pulled out, the announcement of the possibility a few months ago also kicked off a lot of selling.

A lot of funds have rules on what markets they can have their money in so these actions can have a big impact.

Their central bank head also quit a few months ago.

[u/Curius_pasxt]

Answer: As indonesian you will know the GDP is "fake". 0.7% of it is because the government rampantly increase their spending on useless programs like MBG and KopDes.

The real GDP is around 4.3% not 5%.

[u/DragoBleaPiece_123 → u/Curius_pasxt]

Yeah government spending and household consumption are the ones holding this GDP growth

[u/ozgoldebron → u/Curius_pasxt]

Well, the government spending is indeed one of components of GDP. So, government spending is legit source of GDP growth, whatever those money are spent for.

Instead of "fake", it is more like "biased to the top".

While the 5% economic growth may be genuine, the real concern is "Who enjoys that growth the most"?