TEMPO.CO, Jakarta - The Composite Stock Price Index (IHSG) plunged by 6.12 percent at the close of the first trading session on Tuesday, March 18, 2025.

Economist and lecturer at Universitas Pembangunan Nasional (UPN) Veteran Jakarta, Achmad Nur Hidayat, believes that the sharp decline in the composite index reflects the fragility of Indonesia's economic structure.  

Hidayat stated that the decline in IHSG is not merely due to global uncertainty. "It is a warning signal that Indonesia's economic model is overly reliant on commodities, lacks innovation, and is trapped in a cycle of debt to finance populist programs," he said in a written statement on Tuesday, March 18, 2025.  

One of the factors highlighting this fragility, Hidayat noted, is Indonesia's continued dependence on a commodity-based economic paradigm. The country's export revenue is still dominated by commodities such as coal, crude palm oil (CPO), and nickel.  

Hidayat pointed out that these three commodities contribute up to 35 percent of Indonesia's export earnings. The IHSG, he said, was affected when the prices of these commodities fell by 10-15 percent in the first quarter of 2025 due to a slowdown in global demand.

"This directly eroded the performance of mining sector issuers, which dominate stock market capitalization," Hidayat explained.  

He believes the situation is worsened by the stagnation of economic diversification. For instance, the contribution of the manufacturing sector to Indonesia's gross domestic product (GDP) has remained stagnant at 19 percent since 2020.  

He also criticized the government's economic diversification policies as ineffective. "Instead of promoting industrialization, the government has relied on export ban policies (downstreaming), which actually weaken competitiveness," said Hidayat.  

As an example, he cited the nickel export ban, which was implemented before smelter development was successfully widespread. Hidayat argued that this policy only benefits a handful of conglomerates while traditional mining businesses suffer.  

Additionally, Hidayat pointed out that several populist policies have burdened the state budget (APBN), further contributing to Indonesia’s economic vulnerability.  

He cited examples such as the Free Nutritious Meals program, energy subsidies, direct cash assistance and social aid, as well as grand infrastructure projects like the new capital city, Nusantara (IKN), which he deemed unproductive. These programs, he argued, have exacerbated the state budget deficit.  

Hidayat expressed concern that the government’s approach of using debt to cover the APBN deficit is alarming. He asserted that this policy not only strains the country's finances but also undermines fiscal credibility in the eyes of investors.

"It’s no surprise that foreign investors continue to withdraw funds from Indonesia's stock market, with foreign capital outflows reaching Rp10 trillion in the past month."  

According to Hidayat, the government cannot continue ignoring structural economic reforms while opting for quick fixes through debt. "The sharp drop in IHSG reflects investors' lack of confidence in Indonesia's economic future," he stated.  

Stock trading on the Indonesia Stock Exchange (IDX) was temporarily halted during the first session on Tuesday, March 18, 2025, after the IHSG plummeted by more than 5 percent.  

IDX Corporate Secretary Kautsar Primadi Nurahmad confirmed this in a written statement. "We hereby inform you that on Tuesday, March 18, 2025, a temporary trading halt occurred in the trading system of PT Bursa Efek Indonesia (IDX) at 11:19:31 Jakarta Automated Trading System (JATS) time, triggered by a 5 percent decline in the Jakarta Composite Index (IHSG)."  

Aisha Shaidra contributed to the writing of this article.

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