When Indonesia’s rupiah breached the new psychological threshold of 18,155 per US dollar today (June 8), the currency’s lowest ever level, social stability alarm bells rang louder than at any time since the 1997-98 Asian financial crisis.
Attempts to calm public anxiety with familiar assurances that economic fundamentals remain strong – or by attributing the problem to external shocks such as geopolitical tensions around the Strait of Hormuz – will no longer suffice as the effects of an increasingly weak currency ripple through the economy.
Investors and businesses have spent the first half of the year assessing domestic policies and developments, and judging by the rising capital flight, many have concluded that Indonesia’s economic and financial outlook is dimming.
Hardship of a weak rupiah
The consequences of a weakening rupiah are no longer confined to macroeconomics. They are increasingly being felt at the household level through imported inflation.
Indonesia’s heavy dependence on imported energy means that every rise in the dollar immediately increases the rupiah cost of crude oil and refined fuel imports. For ordinary Indonesians, higher energy costs quickly translate into more expensive transportation, power and food.
Imported soybeans used for tofu and tempeh production, wheat for instant noodles and imported livestock feed have all become significantly more expensive. While official inflation figures may appear manageable, households are increasingly forced to spend more simply to maintain the same standard of living.
Indonesia’s vast middle class is particularly vulnerable to these price pressures. Long regarded as the backbone of domestic consumption and tax revenue, middle-income households are now in survival mode, with real wages stagnant, living costs rising and discretionary spending quietly cut.
Families have postponed home and vehicle purchases and switched to lower-cost consumer goods. Savings that once represented future security are increasingly being used to cover monthly deficits, eroding the nation’s already thin financial buffers.
As real incomes decline, a new class of gig-economy working poor is emerging in urban areas, lacking reliable incomes or adequate social protections. Many have turned to online loans and buy-now-pay-later schemes, deepening household financial fragility.
For lower-income Indonesians, a rupiah above 18,000 per dollar represents an existential threat. These households have little room to cut spending because consumption is already concentrated on basic necessities.
Since food accounts for roughly 36–38% of monthly expenditures among poorer families, any increase in staple-good prices directly threatens their ability to purchase sufficient food.
Combined with stagnant agricultural production and weak income growth among farmers, fishermen and informal workers, this dynamic is producing rising vulnerability and a growing sense of social frustration amid widening inequality.
Erosion of public trust
These social pressures have been compounded by layoffs across labor-intensive manufacturing industries.
Rising import costs for raw materials and capital goods have squeezed production, while weakening consumer demand has prevented firms from passing higher costs on to customers.
Manufacturing growth has slowed, and businesses increasingly face difficult choices between profits and employment. The consequences are already visible in the labor market. According to government data, more than 88,000 formal-sector workers lost their jobs in 2025, while an additional 23,470 workers were laid off between January and May this year.
West Java, Indonesia’s manufacturing heartland, recorded the largest number of layoffs. These figures likely understate the true scale of the problem, as many temporary and informal workers fall outside official reporting systems.
The accumulation of these hardships poses a growing risk to the political legitimacy of President Prabowo Subianto’s administration.
Social unrest is seldom driven solely by poverty itself, but rather by the gap between what people expect and what they actually experience, a dynamic political scientist Ted Robert Gurr described as relative deprivation. When expectations rise while opportunities fall, popular frustrations can become politically explosive, as seen elsewhere in the region.
Prabowo entered office promising rapid economic growth of 8% and ambitious welfare initiatives, raising high public expectations of more equitable wealth distribution.
Yet many citizens now confront a starkly different reality: a collapsing currency, rising living costs, declining housing affordability and shrinking formal employment. As the gap between promise and reality widens, public confidence in the political system could sharply deteriorate.
Digital dissent rising
Signs of this growing discontent are already rife online. The viral hashtag #IndonesiaGelap (“Dark Indonesia”) has become a rallying cry for public frustration, particularly among younger Indonesians who view the government’s priorities as increasingly detached from their economic welfare.
Students have recently taken to the streets alongside middle- and lower-class people with similar grievances. They’ve targeted everything from a lack of transparency surrounding government policies and newly created agencies such as the Danantara wealth fund to growing military influence in civilian bodies to a perceived wasteful, super-sized government Cabinet.
If Prabowo ignores these rising calls for remedy and change, what is now, in the main, a cost-of-living economic crisis could soon be a political one that challenges national stability.
Jannus TH Siahaan is political, social, and sustainable development analyst on Indonesia. He is a doctoral alumnus of Padjadjaran University, Bandung, Indonesia.
