Danantara Indonesia Economic Outlook 2026

Danantara Indonesia Economic Outlook 2026

Contents

Forewords by Managing Director Chief Economist (iv) Contributors (v)

Macroeconomics (1)

Global Economic Outlook (2)

The Global System Is Dead, Long Live the Global System (2)

Out of the Storm, Into the Doldrums (3)

Exhibit 1. Global Uncertainty Remains High, But Has Begun to Climb Down (3)

The Emerging Exceptions (4)

Exhibit 2. A Re-Run of Weak Dollar Regime Could boost Indonesian Growth (4)

Exhibit 3. EM Equities Are Poised to Regain Momentum vis-à-vis DMs (5)

Domestic Economic Outlook (6)

Bouncing Back Stronger-Time to Raise the Ceiling (6)

Exhibit 4. Demand Accelerates Especially for Tertiary/Big Ticket Items (6)

Exhibit 5. Manufacturing Recovery Boosted by Robust Domestic Demand (7)

The Floor is Set, the Climb Begins (8)

Exhibit 6. Rate Cuts in 2025 Could Spur Loan Growth Recovery in 2026 (8)

Catalyst for Long-term Growth (9)

Raising the Ceiling (10)

Exhibit 7. Leading Indicators Predict Stronger Growth Ahead (10)

Capital Markets (11)

Asset Class Outlook (12)

Never Bet Against Indonesia (12)

Exhibit 8. JCI Index Has Surged by 20% in 2025, Outperforming LQ45 and IDXBUMN (12)

Exhibit 9. Yet the Performance of Blue-Chips Has Languished (13)

Rupiah Assets: Resilience Assets Trading at Crisis-Like Valuations (14)

Exhibit 10. IDX30 P/E Currently Trades at 1.1 SD Below Mean, Cheaper than Peers (14)

Exhibit 11. Rising Appeal of Equities vs. Bonds (15)

SOE Restructuring Outlook (17)

Continuity of Danantara Reforms (17)

Exhibit 12. SOE Net Profit and Dividends (19)

SOE Restructuring as Equity Story (20)

Exhibit 13. KRAS, TINS, and GIAA Have Performed Exceptionally Well Upon Restructuring by Danantara (20)

Exhibit 14. SOE YTD Share Price Performance (%) (21)

Exhibit 15. SOEs Outlook: Improving Earnings Growth for Listed Major SOEs (22)

Forewords

Ten months young, at the time of this writing, Danantara Indonesia is taking its first steps with bold ambition. Since our launch on 24 February 2025, we have aspired to ignite new growth momentum in Indonesia’s economic journey.

Yet, just as this “infant” began to crawl, the global system and Indonesia’s economic resilience were tested. Persistent shocks-from geopolitical tensions, trade policy uncertainty, and tighter global financial conditions-shook business confidence worldwide. For Indonesia, these headwinds struck at a delicate inflection point. Domestically, the economy was navigating fiscal reprioritisation, tighter liquidity, and the early stages of structural transition under a new administration. Growth moderated, credit softened, and market sentiment wavered. But by the fourth quarter of 2025, resilience-not fragility-prevailed. Recovery signs were clear: consumer confidence rebounded, job availability improved, manufacturing returned to expansion, and financial stress indicators eased.

Looking ahead, we believe resilience will remain the defining macro theme of 2026. The narrative is shifting from shock absorption to policy transmission. Fiscal policy is expected to turn pro-growth, supported by stronger execution and flagship programmes that reinforce domestic demand. Monetary easing undertaken in 2025 will fully transmit its impact, bolstering credit growth and business activity. Together, these dynamics establish a firm baseline with significant upside potential.

At the centre of this transition stands Danantara Indonesia-orchestrating structural change in governance, oversight, and strategic guidance for state-owned enterprises through Danantara Asset Management, while pursuing investment to realise ASTA-CITA under Danantara Investment Management. Our early focus remains on operational sustainability, balance sheet discipline, and consolidation. Yet carefully designed thematic investments have already begun to surface.

The Chief Economist Team of Danantara Indonesia aims to serve as a credible and resourceful advisor for this “newborn” institution in the year ahead. We craft insights and analyses to guide stakeholders-drawing lessons from the past while identifying catalysts and challenges that lie ahead in 2026.

We were born amid complex macroeconomic and geopolitical challenges. But we believe those pressures will shape us into a stronger institution-just as Indonesia has always emerged more resilient after every economic trial it has faced.

We hope you will benefit from our first Inaugural Economic Outlook Report as a guide to the year ahead.

Reza Yamora Siregar Managing Director Chief Economist

Contributors

Barra Kukuh Mamia Head of Macro Research

Evelyn Vidya Paramita Equity Analyst

Putera Satria Sambijantoro Head of Equity Research

Kleovan Nathanael Economist

Rizky Rizaldi Ronaldo Economist

Syahda Chandra Equity Analyst

Timothy Wijaya Equity Analyst

Macroeconomics

Global Economic Outlook

The Global System Is Dead, Long Live the Global System

Decades from now, when economic historians (or whatever AI version thereof) look back at the year 2025, they will identify it as the year when the global trading and financial system took a seemingly fatal blow-and yet survived.

When President Trump was elected in November 2024, his team aimed for no less than a restructuring of the global system. The dollar’s role as reserve currency, they argue, had caused the US to cede manufacturing primacy to China-and punitive tariffs would fix it by forcing other countries to negotiate deals more favorable to US interests.

Twelve months and two rare-earth export restrictions later, Trump has been forced into a series of climbdowns (humorously dubbed “TACO”) with nary any concession from China. Tariff-driven inflation has also eaten away at Trump’s popularity at home, which perhaps explains the relative lack of new tariff increase since early August.

But while China did play its cards well, we can argue that events in 2025 proved, above all, how deeply entrenched the global system has become-so much so that no single country, not even the US, could undermine it. China’s edge in manufacturing proved so entrenched that its exports actually grew amid the tariffs. Although direct Chinese exports to the US have fallen, this has been more than made up by increased selling to other countries.

Equally, the dollar’s sway over global finance is also entrenched, talks of de-dollarization notwithstanding. After a brief run when investors looked to Europe and Japan for safety, capital soon flocked back to the US. The AI boom thus resumed anew, and US yields have moderated again despite America being in a similar predicament, debt-wise, as many other advanced economies.

Out of the Storm, into The Doldrums

The story of 2026, as such, is partly about a return to status quo ante. While effective tariff rates are still at their highest in 90 years, uncertainties around tariffs have subsided, which under most circumstances should support trade and investment.

Exhibit 1. Global Uncertainty Remains High, But Has Begun to Climb Down (Source: World Uncertainty Index, OCE Danantara)

However, headwinds may emerge as growth engines across major economies seem to be cooling off at the same time. China, for instance, anticipated US tariffs with fiscal stimulus and a credit push to support its industries, both of which have recently tapered off and caused China’s growth to moderate. Europe and Japan’s ambitions to revive growth, meanwhile, are facing a fiscal reality check in the form of rising long-term yields-which in turn fuel fears of global contagion via the unwinding of carry trades.

As for the US, a combination of tariffs, immigration policies, and a post-COVID business cycle that is getting long in the tooth has led to creeping stagflation. This heightens the stakes on the political drama swirling around the Fed-as prioritizing inflation could harm growth, but conversely a Trump-pushed dovish turn could further inflame inflation.

The Emerging Exceptions

Fortunately, emerging economies are showing resilience just as the major economies are losing momentum. Outside of Latin America, many emerging countries grew faster in 2025 despite the tariffs and mixed commodity price trends. Export frontloading explained some, but not all, of this outperformance, with big nations like India and Indonesia still able to lean on their domestic demand.

Emerging Asian economies, in particular, benefit from being in China’s “splash zone”, which brings with it lowered inflation as China exports its overcapacity, as well as the potential for more FDI and industrial relocations.

To all these, we can also add good policies-with the IMF’s latest outlook acknowledging that emerging economies have greatly improved their monetary and fiscal credibility in the last two decades, thereby improving their resilience against external shocks.

At the end of the day, however, the most decisive tailwind for emerging markets may still have to come from a phase shift in the global system. Since the dollar became reserve currency in its own right in the early 1970s, there have been several periods when the dollar cheapened and commodities gained.

Exhibit 2. A Re-Run of Weak Dollar Regime Could Boost Indonesian Growth Note on Chart: Weak dollar, strong commodities are ideal for Indonesia. Strong dollar, weak commodities are less than ideal. (Source: Bloomberg, World Bank, OCE Danantara)

By expanding liquidity, these episodes act as pressure-release valves for the global economy-similar to how gold rushes in California (1849) and Klondike (1897) relieved the strain in the old gold-based system.

In summation, we see a probable future where the global trading and financial system bends (moving into a new phase in the cycle) but does not break (fracturing into separate blocs). And in this bending lies opportunities for Indonesia.

Whether this cycle is truly imminent is certainly up for debate, although 2025-when the EM-to-DM equity ratio appears to be bottoming out after a prolonged slide-offers a credible signal pointing in this direction. Ultimately, the starting gun probably awaits accommodative policy shifts from Washington and Beijing, aimed at countering the slowdown in their respective growth trajectories.

Exhibit 3. EM Equities Are Poised to Regain Momentum vis-à-vis DMs (Source: Bloomberg, OCE Danantara)

The ensuing inflation lightens debt loads, boosts profits, and helps readjust global imbalances. All these effects are sorely needed today, given high fiscal debt levels in the US and other advanced economies; slumping industrial profits in China; and widening gap between China’s current account surplus and US current account deficit.

Such a situation would work to the advantage of emerging countries like Indonesia, both due to the weak dollar and the boost to commodity exports. Past episodes in the 1970, the late 1980s, and the 2000s all coincided with high GDP growth in Indonesia.

Domestic Economic Outlook

Bouncing Back Stronger – Time to Raise The Ceiling

The shocks in the global economy came at an inopportune moment for Indonesia, as our own economy is undergoing a structural transformation under the new administration. The year 2025 thus stood out as a stern test for our economic resilience-and one which we managed to withstand reasonably well.

Most indicators tell a similar story: the first half of 2025 marked a period of consolidation, with reduced fiscal spending and tighter liquidity in the financial system. This led to a cooling of credit from its previous double-digit growth rate, and eventually a retrenchment in household consumption which persisted into the third quarter.

But then, things began to improve-everything, everywhere, all at once. Consumer spending roared back into life, with sentiment recovering nearly to its previous high plateau. This recovery followed an improvement in job prospects, which reversed earlier, well-publicized job losses particularly within the manufacturing sector.

Exhibit 4. Demand Accelerates Especially for Tertiary/Big Ticket Items Mandiri Spending Index subcomponents: Mobility & Travel, Food & Groceries, Tech & Electronics (Source: Mandiri, OCE Danantara)

The recent four-month stretch of manufacturing expansion-offsetting the prior four-month stretch of contraction-is therefore a key element to the turnaround. While the initial rebound was assisted by frontloaded export demand, more recent expansion is clearly driven by domestic orders.

Exhibit 5. Manufacturing Recovery Boosted by Robust Domestic Demand Manufacturing PMI (Purchasing Managers Index), New Orders, New Export Orders (Source: S&P, OCE Danantara)

What we are witnessing, then, is a textbook virtuous cycle of growth, where more production begets more employment and more demand, which in turn fuels even greater production. This positive momentum provides a solid base for continued expansion in 2026.

The Floor is Set, The Climb Begins

If 2025 proved that Indonesia retains a high floor to its GDP growth, then 2026 will test how high this growth could rise. And while there are significant setbacks-most urgently, the flooding disaster in Sumatra with its humanitarian and economic consequences-there are several upsides that potentially outweigh the downside risks.

Fiscal policy offers perhaps the most tangible upside. With the early-2025 Budget reprioritization and spending restraint behind us, the government now shifts to a firm pro-growth stance, focusing on removing administrative bottlenecks to accelerate fiscal disbursement. It certainly helps that the government’s biggest and most far-reaching initiative-the Free Nutritious Meal (MBG) program-has gained firmer footing, with rapidly increasing opening of meal stations in recent months. This ensures faster fiscal disbursement and a more consistent demand-side driver for the economy in 2026.

Monetary policy presents a more nuanced picture. While BI may have less scope for additional rate cuts in 2026, its previous cuts-totaling 125 bps in 2025-should begin to feed through to credit expansion over the upcoming quarters. Demand for working capital loans, in particular, is set to rebound alongside renewed business activities and the associated operational expenses.

Exhibit 6. Rate Cuts in 2025 Could Spur Loan Growth Recovery in 2026 (Source: BI, OCE Danantara)

Catalyst for Long-term Growth

Unlike working capital loans, demand for investment loans has never abated, indicating a fundamentally robust appetite for investment despite fluctuations elsewhere in the economy. This is a promising sign, since an investment-led model represents the surest path for Indonesia to sustain higher GDP growth for the long haul.

We should note, nonetheless, that investment activity has recently narrowed, in terms of both investor composition and sectoral focus. Growth in 2025 was driven largely by domestic investors, while foreign direct investment (FDI) ebbed amid global uncertainty. Sector-wise, the expansion in investment loans has been concentrated in just a handful of industries-namely mining, logistics, and healthcare. The upside potential, as such, lies in the broadening of investment appetite and the revival of FDI inflows.

Danantara’s role as domestic catalyst will also be pivotal, both through initial capital deployment by Danantara Investment Management (DIM) and optimization of SOE business by Danantara Asset Management (DAM), which would pave the way for more sustained investments in the future.

Raising The Ceiling

All these drivers-fiscal, monetary, and Danantara-combined with existing domestic momentum point towards potentially faster growth in 2026. Even so, we ought to remain vigilant towards potential macro risks-regarding inflation, yields, exchange rate, and non-performing loans-that could heat up as growth accelerates.

Exhibit 7. Leading Indicators Predict Stronger Growth Ahead Leading Economic Index (LEI), Coincident Economic Index (CEI) (Source: Various sources, OCE Danantara)

Such pressures could, in extremis, curtail growth momentum by forcing a pivot away from pro-growth policies in favor of a more cautious stance. In effect, this implies a certain “ceiling” often referred to as potential output in academic parlance-beyond which growth could be difficult to sustain over a longer period.

Raising this ceiling requires capacity building across multiple fronts: strengthening domestic food and industrial production to keep inflation in check; expanding tax revenue to maintain fiscal capacity and contain yields; and improving domestic liquidity to finance future investments while preserving financial-system health.

These tasks are notably more complex than stimulating demand via fiscal and monetary policies. It requires tackling several longstanding trends that have beset the Indonesian economy, such as a declining tax ratio and the erosion of Indonesian manufacturing competitiveness.

Structural challenges-especially the fact that domestic liquidity (relative to GDP) has stagnated since the Asian Financial Crisis-will also need to be addressed. Without a relative expansion in liquidity, the financing of public-sector projects could ultimately crowd out private-sector investments. Well-calibrated monetary and investment strategies will be needed to produce a more synergistic “crowding-in” effect.

At the end of the day, bouncing back from the challenges and teething problems of 2025 may prove to be the easier part. Lifting the ceiling that has for so long held back Indonesian growth would be the tougher task-but one which, if executed well, would be most transformative over the long run.

Capital Markets

Asset Class Outlook

Never Bet Against Indonesia

Indonesia’s capital markets delivered a divided performance in 2025. Despite the Jakarta Composite Index (JCI) posting one of its strongest rallies in over a decade, investor sentiment remained uneven. The lagged effects of monetary easing and a stronger fiscal impulse are expected to support an earnings recovery in 2026. The key question now: will foreign flows return, and will fundamental stocks stage a comeback?

In our views:

Equities: A brighter GDP growth outlook may drive re-rating in 2026. After two years of underperformance relative to emerging market peers, Indonesia’s equity market is positioned for a rebound if fiscal support and monetary easing translate into stronger domestic credit and household consumption.

Valuation: Headwinds have eased. With bond yields declining relative to earnings yields, equities could become more attractive in 2026 from a risk-reward perspective, particularly for yield-seeking institutional investors.

Exhibit 8. JCI Index Has Surged by 20% in 2025, Outperforming LQ45 and IDXBUMN (Source: Bloomberg)

Indonesia’s equity markets are celebrating, but not all investors are joining the party. The JCI surged 20% this year, reaching a record high of 8,710 in early December-its strongest annual performance in 12 years. Yet traditional blue-chip stocks have lagged. The LQ45 Index, Indonesia’s benchmark of liquid stocks, underperformed most emerging market peers for the second consecutive year.

Exhibit 9. Equity Market: Yet the performance of blue-chips has languished (Source: Bloomberg)

Macro pressures weighed heavily on corporate earnings. The largest constituents of the LQ45-state-run banks and Telkom-are projected to deliver weak earnings growth in 2025 as subdued domestic demand eroded revenues. Foreign ownership remains significant in Indonesia’s equity free float. During periods of macro uncertainty, this often translates into persistent selling pressure, particularly in liquid stocks favored by long-only institutions. As a result, valuation discounts can emerge even when company-level fundamentals remain intact.

While near-term discomfort is likely, the current environment could prove constructive for forward returns once macro and policy conditions stabilize. Encouragingly, earnings expectations for Indonesia’s blue-chip stocks are no longer being downgraded. Stronger fiscal spending in 2026 may provide an earnings floor for domestically oriented sectors. Key catalysts include the potential expansion of the flagship free meals program and capital deployment from Danantara into growth-generating investment projects.

If executed effectively, these initiatives should deliver a clearer demand impulse, reducing downside risks to revenues and supporting credit formation. In parallel, the government has maintained a targeted stimulus approach, with potential benefits likely to spill over into 2026. Measures such as tax incentives, insurance relief, and credit support via state banks could serve as meaningful catalysts for the domestic economy. Over time, these initiatives should translate into stronger earnings growth for publicly listed companies.

Rupiah Assets: Resilience Assets Trading at Crisis-Like Valuations

In his annual Berkshire Hathaway shareholder letter, legendary investor Warren Buffett often reminded shareholders: “Never bet against America.” We believe the same principle applies to Indonesia. While rupiah-denominated assets may not always deliver stellar returns due to the country’s limited integration with global financial systems and supply chains, Indonesia’s self-sustaining domestic consumption provides stability and resilience, shielding the economy and its assets from external shocks.

Rupiah assets remain a classic mean-reversion play. Historically, valuations have reverted to long-term trends once prices became excessively depressed. Today’s environment presents opportunity: Indonesian equities are trading at historically cheap levels relative to both their own past and regional peers. This sets the stage for long-term return potential, provided earnings avoid further downgrades-a scenario increasingly likely in 2026.

Moreover, when equity earnings yields compare favorably to government bond yields, the case for equities becomes compelling. Despite higher volatility, the relative risk-reward profile justifies allocation to stocks.

Exhibit 10. IDX30 P/E currently trades at 1.1 SD below mean, cheaper than peers (Source: Bloomberg)

Exhibit 11. Equity Outlook: Rising Appeal of Equities vs. Bonds (Source: Bloomberg)

Many of Indonesia’s most liquid equities are state-owned enterprises (SOEs). Reform-linked rerating could attract renewed foreign inflows, particularly as foreign investor positioning in Indonesia remains light compared to historical norms. This caps downside risks while leaving room for upside. Notably, several listed SOEs currently offer dividend yields exceeding 8% at prevailing share prices. For yield-seeking investors, this presents an attractive risk-reward proposition.

Despite strong fundamentals, Indonesia’s equity market liquidity remains modest relative to the size of its economy. Concentration in a limited set of names restricts flexibility for large institutional asset managers. Capital-market regulatory reforms are therefore imperative, especially as competition for emerging market flows intensifies. Vietnam, Indonesia’s key competitor for FDI, is actively reforming its equity market to attract foreign portfolio flows. Meanwhile, China-whose weighting in EM passive indices has declined over the past decade-is staging a stock-market comeback in 2026.

We believe Indonesia’s re-rating potential in 2026 could be driven by:

Domestic fiscal and monetary policy efficacy: stronger execution supporting credit and consumption.

SOE-level reforms: micro-level improvements boosting earnings quality.

Capital-market reforms: expanding liquidity and attracting foreign inflows.

Together, these factors could create a positive feedback loop, triggering a capital-market rebound and long-term outperformance of rupiah assets. Indonesia’s track record of resilience is well documented. The capital markets recovered from the 1997 Asian Financial Crisis, weathered the 2008 Global Financial Crisis, and rebounded from the 2020 Covid shock. The economy has also endured five direct presidential election cycles and numerous local political transitions without derailing its growth trajectory.

Our view is clear: never bet against Indonesia. And neither should you.

SOE Restructuring Outlook

Continuity of Danantara Reforms

The optimistic case for Danantara is not that every state-owned enterprise (SOE) becomes a national champion overnight. Rather, the expectation is that SOEs will establish the foundation and systems necessary for long-term operational sustainability. If 2025 was about building the scaffolding of reform, then 2026 is the year when markets will demand proof of execution. Early price signals from PT Krakatau Steel, PT Garuda Indonesia, PT Timah, and PT Telkom suggest investors are willing to believe in the turnaround story.

In our views:

This is not a bailout cycle; it is operational and balance sheet reset. Capital injections and restructurings matter most when they come with hard conditionality: asset rationalization, improvement in operational KPIs, and credible accountability.

Consolidation as the main catalyst. The ambition to simplify SOE universe and reduce fragmentation is a structural unlock for both governance and capital efficiency.

Markets are already rewarding credible turnaround progress. Investors have responded positively to several SOE turnaround narratives expected to generate greater shareholder value in the long-term.

Reforms in major SOEs are next. Bank Rakyat Indonesia, Bank Mandiri, and Bank Negara Indonesia are all positioned for earnings recovery as funding costs ease and loan growth improves. Telkom is positioned to unlock shareholder value with higher asset utilization.

Danantara has earned some degree of market credibility from ongoing turnaround efforts in Garuda Indonesia, Krakatau Steel, and PT Timah.

Total assets of SOE collectively account for more than half of Indonesia’s nominal GDP, meaning operational improvements will have far-reaching implications for the country’s growth outlook. Everyday economic activity is intertwined with SOEs: electricity from PT PLN, fuel from PT Pertamina, air travel via Garuda Indonesia, and savings entrusted to state-run Himbara banks. Improved operational capacity within SOEs not only enhances efficiency but also fosters healthier competition-ultimately serving as the grease for broader economic growth.

The establishment of Danantara marks a meaningful shift in SOE management and supervision. Previously, ownership was fragmented, with mandates, oversight, and dividend flows dispersed across multiple entities. Danantara introduces a more centralized decision-making framework, designed to impose discipline, standardize governance, and provide checks and balances to SOE commercial autonomy.

In market terms, the question is no longer “will the state stay involved?” – it will. The focus now shifts to whether that involvement becomes more predictable and meritocratic, with commercial decisions driven by long-term business viability rather than short-sighted interests.

President Prabowo Subianto has explicitly set the objective of reducing the number of SOEs from over 1000 to about 200. Such consolidation should be understood as a multi-year program rather than a one-year corporate action calendar. For public markets, fewer entities can mean fewer conflicted mandate and more consistent business decisions, eventually translating into greater shareholder returns in the form of dividends.

The restructuring efforts led by Danantara began in 2025, widely seen as a “reset year” where challenges were frontloaded and identified transparently. The emphasis was more on laying the groundwork for commercial sustainability rather than immediate performance. What matters in 2026 is execution. With credible consolidation underway-supported by objective audits and problem identification-the next steps involve balance-sheet repair and integration. This sequencing is critical, as it sets the stage for improved operational efficiency and long-term sustainability across the SOE universe.

Exhibit 12. SOE Net Profit and Dividends Consensus expects SOEs net profit to grow by ~10% in 2026 (Source: Bloomberg)

SOE Restructuring as Equity Story

For investors, restructuring of state-owned enterprises (SOEs) has become a critical market variable shaping country risk premia and, ultimately, Indonesia’s equity story. Danantara’s target is that SOEs evolve into more resilient entities, able to withstand macroeconomic cycles such as commodity price swings and heightened volatility in global financial markets that could otherwise disrupt financing decisions.

Markets have already responded positively to the turnaround of several SOEs, as evidenced by sharp share price rallies. Investors are rewarding tangible restructuring progress, signaling confidence in the reform agenda.

Exhibit 13. KRAS, TINS, and GIAA have performed exceptionally well upon restructuring by Danantara (Source: Bloomberg)

Exhibit 14. SOE YTD Share Price Performance (%) Note: SOE Banks include BBRI, BMRI, BBNI, BRIS, BBTN (weighted by market cap). (Source: Bloomberg)

Telkom has emerged as a useful “stress test” for whether restructuring can translate into a credible re-rating pathway. In 2025, the company undertook streamlining efforts, targeting a materially leaner structure by reducing its historically wide subsidiary footprint. This refocus on core competencies aims to cut overhead drag and improve efficiency. Higher utilization and third-party revenues are expected to enhance earnings quality. The new asset-light Telkom was welcomed by investors, with TLKM shares surging more than 30% and registering rare foreign inflows amidst broader foreign selling. Telkom has outperformed other listed SOEs in the IDXBUMN20 Index.

Garuda’s restructuring narrative centers on near-term operational rehabilitation – maintenance, fleet reactivation, and utilization supported by stage funding. A possible merger between Citilink and Pelita Air has been raised to reduce redundancy and improve synergies, particularly in fuel procurement. This “back-to-core” framing highlights strategic logic in rationalizing operations.

Reforms at Krakatau Steel remain fundamentally balance-sheet constrained, given elevated debt loads and legacy investment overhang. Nonetheless, gradual restructuring measures have delivered quick wins, reducing interest burdens and easing cash-flow pressures. As a result, KRAS shares have more than tripled, making it the best-performing SOE stock in 2025.

Looking ahead to 2026, PT Timah offers another value-recovery story. New rules imposing substantial fines on illegal miners underscore a tightening enforcement posture. By curbing leakage, smuggling, and permit arbitrage, improved sector governance has predictably driven a re-rating in PT Timah’s stock.

The restructuring of seven state construction firms into fewer entities reflects recognition that the status quo is not capital-market-friendly. Once liabilities are ring-fenced and project selection improves, the sector can re-enter capital markets with more credible issuance plans – equity, quasi-equity, or asset recycling – rather than relying on rollovers and ad-hoc support.

Exhibit 15. SOEs Outlook: Improving earnings growth for listed major SOEs Major state-run banks might post ~10% earnings growth next year, with most provisioning and Opex frontloaded already this year (Source: Company, Bloomberg)

Beyond restructuring, ecosystem-building is an underappreciated dimension. The launch of Indonesia’s first bullion bank connecting SOEs such as PT Aneka Tambang, PT Pegadaian, and Bank Syariah Indonesia signals a policy preference for deeper domestic financial intermediation of strategic commodities. This indirectly strengthens SOE-linked value chains and supports broader capital-market development.

For Himbara lenders – BRI, Mandiri, and BNI – investor focus is less on existential risk and more on earnings quality and capital allocation under policy constraints. With 2025 marking a recovery year, 2026 is expected to bring improvements in liquidity bases, credit growth, and earnings, supported by stronger cost-to-income discipline.

Structural reforms will determine whether macro tailwinds translate into sustained re-ratings rather than cyclical bounces. Healthier SOEs reduce budget leakage and the need for recurring rescues, while higher dividends strengthen fiscal posture. Turnarounds in hard cases – airlines, steel, and construction – are where credibility is earned. If restructuring improves operating cadence and balance-sheet resilience, spillovers to broader SOE perception among investors could be significant.

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