Jakarta — The appointment of Purbaya Yudhi Sadewa as Indonesia’s new finance minister has shifted market psychology back toward optimism, at least for the short term. Since his swearing-in in early September, Purbaya — a technocrat with a reputation for pragmatic policies — has laid out a series of fiscal moves that have helped nudge confidence in both equity and corporate credit markets.
Indonesia’s economy posted 5.12 per cent GDP growth in the second quarter, the fastest pace since 2023. Fiscal data also show a budget deficit of 321.6 trillion rupiah, or about 1.35 per cent of GDP, giving Purbaya some room to argue for a calibrated boost while still maintaining stability. This narrative has resonated well in his early parliamentary hearings.
Markets initially reacted nervously to the sudden cabinet reshuffle that replaced Sri Mulyani, with the Jakarta index falling and the rupiah weakening. However, sentiment rebounded quickly after Purbaya announced high-profile measures, including transferring around 200 trillion rupiah of idle state balances into the banking system to boost liquidity, as well as launching a $1 billion stimulus program targeting households and infrastructure. These policies reassured investors that the government was committed to growth without losing sight of fiscal discipline.
The so-called Purbaya Effect lies in this combination of ambition and execution. His messaging has focused on accelerating growth while at the same time implementing concrete programs that investors can quantify — from bank liquidity injections to targeted subsidies. This dual strategy has recalibrated expectations: rather than anticipating unchecked spending, markets now see a growth-first approach with guardrails.
Still, the optimism is fragile. The rupiah has shown signs of depreciation this year, while external demand remains uncertain across Asia. Credit-rating agencies are closely monitoring whether the additional budget space will crowd in private investment rather than merely financing subsidies. Analysts argue the ultimate test is whether Purbaya’s measures deliver sustained job creation and higher private sector investment, not just headline GDP gains.
Corporate bonds and banking sector spreads have tightened slightly since the liquidity moves, and consumer-related stocks have outperformed, reflecting optimism about rising household demand. Domestic institutional investors are showing more appetite for local assets, while foreign investors remain cautious, waiting to see how policies play out in the coming quarters.
Policy risks remain. Purbaya has rejected a sweeping tax amnesty and has so far signaled no intention of altering the statutory deficit ceiling. Yet political pressures for greater social spending are real, and any erosion of fiscal rules could quickly undermine the goodwill generated by his early actions. The coming months will be decisive: investors will judge whether his liquidity injections are temporary support or the beginning of a longer fiscal expansion.
For now, the Purbaya Effect at least has impact positicive psychologically. It has replaced initial anxiety with conditional optimism grounded in visible policy steps. If these steps succeed in unlocking investment, creating jobs, and stimulating consumption without destabilizing macroeconomic balances, then the effect will prove durable.
