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[JAKARTA] Protests in Jakarta, marked by vandalism and looting that damaged infrastructure, eased slightly on Monday (Sep 1) after President Prabowo Subianto scrapped a planned pay hike for lawmakers, but not before causing an estimated nine trillion rupiah (S$770 million) in economic losses, particularly in the Greater Jakarta area.

The retail, transportation and services sectors were hit hardest with the services sector – nearly half of the national economy – suffering a sharp three-day decline, indicated the Center for Economic and Law Studies (Celios).

Businesses and analysts still remain cautious. Nailul Huda, digital economy director at Celios, warned that the situation remains delicate although the angst appears to have cooled.

Ari Jahja, head of Indonesia research at Macquarie Capital, said investors are awaiting Prabowo’s next steps, be it to address public demands or restore market confidence. “Indonesia could emerge stronger if structural reforms are successfully implemented,” he added.

Indonesia’s stock exchange closed down 1.21 per cent on Monday, while the rupiah strengthened 0.33 per cent, following a stronger-than-expected trade surplus in July.

Damage tolls

Violent protests in Jakarta damaged public transport infrastructure, with 22 TransJakarta bus stops vandalised, burned or looted, Governor Pramono Anung said Monday. He estimated total losses at 55 billion rupiah.

Protests in Jakarta subsided on Monday after days of unrest and looting, as some demonstrators held back following weekend riots. In Makassar, where last weekend’s protests left four people dead, students marched to the local parliament building demanding justice for the victims, Kompas newspaper reported.

A few mass demonstrations continued outside the parliament building in Central Jakarta, though in smaller numbers than last weekend. Police deployed around 5,000 personnel to secure the area, Central Jakarta Police Chief Commissioner Susatyo Purnomo Condro said.

Protests are expected to continue in the coming days, with demonstrators urging Prabowo to enact policy reforms, including a review of the costly free lunch programme and redirecting its budget towards initiatives that could generate jobs and curb lay-offs.

The Indonesian Student Alliance, which had planned to stage another protest outside parliament, said it decided not to return to the streets on Monday after last week’s rally ended in violence. Prabowo had earlier ordered firm action against violent protesters and increased security at key sites.

Unrests in Jakarta have led to cancellations at hotels and restaurants, particularly in the city centre. Hariyadi Sukamdani, chairman of Indonesia Hotel and Restaurants Association, noted that cancellations began on Friday after demonstrations escalated and turned deadly, driven not only by safety concerns but also by heavy traffic and restricted access to central areas.

He added that while hotels and restaurants are still operating normally, the risk of temporary closures remains if tensions flare up again. “There is still anxiety that the unrest could escalate, so we have advised hotels to strengthen their security,” he said.

Helmi Arman, Citi’s chief economist for Indonesia, warned that if the government’s response is seen as inadequate -– or delayed – prolonged protests could hurt private-sector investment and dampen spending on durable goods and tourism.

“It is unclear to us at this juncture what kind of corrective actions it would take to appease the protests,” he wrote in a note.

In Jakarta, military personnel were deployed to guard commercial facilities, including shopping malls and office towers, The Business Times observed.

Foot traffic in Jakarta’s Thamrin and Sudirman business districts was noticeably lighter than usual, as many offices implemented work from home arrangements amid lingering concerns that unrest could flare up again.

Public transport services, including TransJakarta and the mass rapid transit, resumed normal operations on Monday after being targeted by protesters, who had previously set fire to several bus stops and station entrances.

Growth risks

Analysts said rising political tensions in Indonesia are heightening economic risks, especially in the wake of the 19 per cent US tariffs that came into effect in August.

In a note, OCBC economists Lavanya Venkateswaran and Ahmad Enver said the impact of the tariffs is likely to start showing in August data. They projected that the economy will slow to 4.5 per cent in the second half of the year, down from 5 per cent in the first half, reflecting the combined effects of external and domestic pressures.

“It remains to be seen whether the protests will prompt any significant policy changes under the Prabowo administration, but this is not our base case,” they added.

In a note, S&P Global Ratings analysts said protests in several Indonesian cities are unlikely to escalate to a level that would undermine political stability. They added that policy adjustments could include measures to support the economy and boost social spending.

However, the analysts warned that if economic pressures intensify and fuel social tensions, it could become increasingly challenging for the government to balance competing spending priorities while maintaining fiscal discipline.