Expert: JCI Plunge Signs Crisis of Investor Confidence in Indonesian Market
March 21, 2025
Romauli Nainggolan, a lecturer at the Faculty of Business and Management at Ciputra University (UC) Surabaya, stated that the plunge in the Jakarta Composite Index (JCI) reflects a crisis of confidence among economic players in the Indonesian market.
He said the JCI’s decline did not occur suddenly, but rather gradually over the past few months.
“This was triggered by various factors. The accumulation of these triggers created the momentum for the JCI’s plunge,” he said on Friday (March 21, 2025).
He analysed several factors contributing to the JCI’s plunge. First, the disrupted domestic economy, as seen from the fiscal situation.
“The fiscal situation is indicated by a 7.9 per cent decline in tax revenue compared to last year. The widening budget deficit due to the free meal program has resulted in a state budget deficit of IDR 31.2 trillion,” he explained.
Second, unsettling political factors, such as the expansion of the TNI’s role as outlined in the revised TNI Law and the rumours that Finance Minister Sri Mulyani would resign.
“And external factors include global trade, US trade policies, and tensions in the Middle East,” he said.
These conditions have an impact on the Indonesian economy. In the short term, he said, capital flows could leave Indonesia, economic actors would seek safe havens for investment, and investment choices might shift to bonds and gold.
The long-term impact is that the performance of the goods and money markets could decline due to investor withdrawals.
Furthermore, declining investment in manufacturing will encourage companies to reduce production and lay off workers.
“Reduced production of goods or services in the market will drive up inflation. A reduction in the workforce will lead to unemployment or layoffs, as has happened at SRITEX and others,” he explained.
To address these conditions, he suggested several steps: Lower-income families with minimum wage (UMR/UMP) incomes must manage their money wisely and avoid online loan debt (pinjol).
“Middle-class people should not use their funds to buy shares, even if they are cheap,” he said.
He also emphasised the importance of building trust with the government to encourage investors to return to Indonesia through fiscal and monetary policy interventions. (ris/ipg)