By: Eko B. Supriyanto, Chairman of Infobank Media Group
Economic growth in the fourth quarter of 2025 was 5.39 percent and 5.11 percent annually — reportedly the highest among the G20 countries. These growth figures were greeted with cheers of victory by the Palace. Coordinating Minister for Economic Affairs Airlangga Hartarto called it proof of the strength of the economic foundation. Meanwhile, the mainstream media was busy displaying infographics showcasing the glory of the macro figures.
However, amid the statistical “cheers,” the market and international rating agencies read a much bleaker narrative. Moody’s coldly downgraded Indonesia’s outlook from “stable” to “negative.” This is a new paradox among the many paradoxes that have often occurred over the past 10 years. Indonesia cannot be satisfied with being a “lame tiger” — growing rapidly but fundamentally fragile.
According to a limited discussion by the Infobank Institute, Indonesia is facing a paradox that is not really a paradox. Rather, it is a classic symptom of political economy. Namely, growth hijacked by short-term politics. The figure of 5.11 percent may be real, but it is growing on a fragile foundation of governance.
Moody’s warning is not just about debt or fiscal deficits, but a stern rebuke of the country’s institutional quality. When the Worldwide Governance Indicators (WGI) recorded a decline in Indonesia’s score for government effectiveness and regulatory quality, it confirmed that our bureaucratic and regulatory machinery is experiencing disorientation.
Moody’s warning is actually a criticism of a development model that relies too heavily on commodity momentum and consumption, while neglecting institutional democratic consolidation. The government often issues policies reactively—for example, in response to food or energy price fluctuations—without a clear and consistent framework.
This may create “policy noise” that unsettles investors. The volatility of the stock market and the rupiah exchange rate mentioned by Moody’s is not merely a technical phenomenon. Rather, it reflects a lack of confidence in the direction and capacity of the state to manage the economy rationally and transparently.
Behind the achievement of the highest growth in the G20 lies a crucial question: for whom is this growth? Is it the result of increased productivity and innovation, or merely a spillover from the commodity cycle and massive infrastructure projects that are fraught with governance risks?
And, Moody’s, in its subtle language, highlights that the credibility of Indonesia’s policies in the eyes of global investors is being eroded. This is clearly dangerous, as the Indonesian economy is still heavily dependent on foreign capital flows to cover its current account deficit.
Lessons from the 1998 Crisis
This situation is reminiscent of the 1990s, according to Infobank, when high growth masked structural weaknesses and systemic corruption, which led to the 1998 crisis. Now, although the context is different, the same pattern is emerging, with institutional weaknesses being ignored in favor of achieving politically motivated macroeconomic targets. The government may be proud of being the G20’s “growth champion,” but Moody’s negative rating is a wake-up call that in the global economy, governance quality is just as important—if not more so—than growth speed.
Therefore, the response to Moody’s warning should not be merely defensive or blame foreign institutions. This is a moment for deep introspection. The government needs to restore policy coherence and predictability, strengthen transparent communication, and—most importantly—stop politicizing the regulatory process. Without fundamental improvements in government effectiveness and regulatory quality, 5.11 percent growth is merely a glass house ready to collapse in the face of global uncertainty.
Sustainable development cannot be built on the foundations of weak democracy and chaotic governance. We need “dignified growth”—that is, growth that is inclusive, transparent, and managed by strong and credible institutions. Without that, we will only be the top of the class on the G20 stage, but at the same time a sick patient in the global economic emergency room.
Moody’s, in its assessment, clearly sees the quality of growth and the sustainability of fiscal policy. They do not only calculate the Gross Domestic Product (GDP) figures, but also read the political risks behind those figures: dependence on commodity revenues, the burden of energy subsidies that still lingers, the slow pace of bureaucratic reform and the actual investment climate, as well as increasing pressure on the State Budget (APBN) from various sectoral interests.
The widening fiscal deficit of 2.92 percent of GDP provides an important clue. Deficits are not a sin if they are used for productive investment—basic infrastructure, education, health, and research—which will multiply long-term economic capacity. However, if the deficit is mainly used to cover inefficient spending, misdirected subsidies, and flagship projects whose economic and social value is questionable, then what we see is not acceleration, but an accumulation of vulnerabilities.
This is where the intersection between economics and politics becomes crucial. Fiscal governance is a mirror of governance. Widening deficits during periods of high growth often signal weak budgetary discipline, strong political pressure to spend (especially to fulfill campaign promises), and the failure of structural reforms to open up new sources of revenue that are more equitable and progressive.
Growth Euphoria and the “Lame Tiger”
Moody’s “negative” warning is a gentle slap in the face to growth euphoria. It says: “You may be running fast now, but your feet are shackled by unproductive debt, and the road is full of governance potholes. Be careful, one day you could fall.”
According to Infobank records, Indonesia has been stuck in a fetishism of high growth for too long, as if figures above 5 percent are a “sacred mantra” that justifies all means. It could be that the government has “forgotten” that what is more important than how fast we grow is how we grow, for whom we grow, and on what foundations we build.
A closer look at the growth in the fourth quarter of 2025 may reveal wide disparities, high import dependence in the industrial sector, and stagnation in the real MSME sector. In fact, MSME credit has slowed down from the previous year.
Furthermore, a widening deficit, without being accompanied by fundamental improvements in spending effectiveness and the expansion of a fair tax base, will only shift today’s burden to future generations through greater debt. Many factories have closed and car and vehicle sales have declined.
Finally, Indonesia must not be content with being a “lame tiger”—growing rapidly but fundamentally fragile. The government must shift its focus from merely pursuing growth figures to improving the quality of growth and strengthening fiscal and political governance. Eliminate waste, stop protectionism that only benefits cartels, improve the taxation system, and redirect spending to things that truly build the nation’s economic independence.
Moody’s has sounded the alarm. Rather than busy denying it or dismissing it as a foreign conspiracy, we should use it as a moment for introspection. Because healthy growth is not what rating agencies fear, but rather growth that is felt by the people as a real and sustainable improvement in welfare.
Economic growth must be accompanied by good governance—not plundering and “extortion” in the name of the people. Moreover, massively allowing the criminalization of bad debt, which actually undermines market confidence. Honestly, there is currently a lot of uncertainty and market anxiety. Indonesia must use the momentum of growth to rebuild the trust that is slowly fading among businesses.
