In January 2025, Indonesia’s equity market is influenced by a mix of domestic and global economic developments. Key events such as the inauguration of Donald Trump for a second term as US President, Indonesia’s fiscal policies under President Prabowo Subianto, and Bank Indonesia’s (BI) rate cut have shaped market sentiment and performance.

The return of Donald Trump as US President has introduced uncertainty in global markets. His administration’s protectionist policies and potential tariff adjustments are creating concerns about trade flows, particularly for emerging markets. Despite global economic challenges, the US economy remains resilient, supported by strong consumer spending and corporate earnings. This has bolstered the US dollar, which poses challenges for emerging markets like Indonesia by increasing import costs and pressuring local currencies.

President Prabowo Subianto announced substantial budget cuts totaling 306.7 trillion rupiah (approximately $18.8 billion), representing about 8% of the approved government spending for 2025. These cuts aim to enhance fiscal efficiency and include directives to halve expenditures on ceremonies and business travel. Despite these reductions, there are plans to expand a pivotal program providing free meals from 17.5 million to 82.5 million recipients by year’s end.

Bank Indonesia (BI) cut its benchmark interest rate by 25 basis points to 5.75% to stimulate economic growth amid global uncertainties. This move is aimed at boosting domestic consumption and investment, providing a tailwind for equity markets.

Indonesia’s equity market reflects cautious optimism amid domestic policy support and global headwinds. While BI’s rate cut provides short-term relief, external factors such as US policy shifts under Trump’s administration and a strong dollar continue to pose risks.