Nina Megayanti used to think she had it all.
For years, she had a comfortable life in Jakarta, Indonesia’s capital, eating out with friends, taking weekend trips abroad and making house payments. But in 2023, she was laid off from her marketing job as the economy slowed. She was out of work for more than a year, lost her housing deposit and went through almost all of her savings.
Millions of other Indonesians are similarly desperate. The International Monetary Fund has warned that the country’s unemployment rate will rise this year to become the second-highest in Asia, exceeded only by China’s.
But the government says the economy is doing fine, pointing to its annual growth rate of about 5 percent. Since taking office in October, President Prabowo Subianto has been focused on fulfilling campaign pledges, including a nationwide free school lunch program and affordable housing. He has also set up a new sovereign wealth fund.
To bankroll these projects, he has redirected the equivalent of billions of dollars in government funds, slashed budgets and demanded austerity from the ministries of public works, health and education, among others. He has also fired thousands of government contractors. But Indonesia’s economy is heavily dependent on state spending, and critics say Mr. Prabowo’s priorities are misplaced.
“The government is in denial about the economy,” said Awalil Rizky, an economist at the Bright Institute, an independent think tank in Jakarta. “The employment figures are evidence that the conditions are indeed not good.”
The I.M.F. has projected that Indonesia’s unemployment rate will rise to 5 percent this year, from 4.9 percent in 2024. And on Tuesday, the government lowered its estimate for economic growth in 2025 to about 5 percent, from 5.2 percent.
Ms. Nina, 42, eventually found work in November, but on a contract basis, at a third of what she had been making. “It’s absurd, but I had no other option,” she said.
In the last five years, millions of Indonesians have fallen out of the middle class, government data show. Less than a fifth of the population is now considered to be in that category, and consumer spending has fallen. President Trump’s tariff policies have made matters worse for Indonesia’s export-driven economy, which is Southeast Asia’s largest.
Manufacturers have been suffering, with demand slowing for items like textiles and shoes, both at home and abroad. Cheap Chinese imports of those products have also hurt local industry. Factories have shut down and laid off workers, and many people have been forced to take off-the-books jobs or join the gig economy.
Dimas Fatwa Ramadhan, 29, started driving for ride-hailing app companies three years ago, to supplement what he and his wife make from their small corner store. But competition on the apps has become stiff.
“I have to be on the road for at least 12 hours” to earn the equivalent of $9, he said. “But this is my only way out,” he added. With only a high school diploma, he said, his chances of landing a job are slim.
Last month, Mr. Prabowo’s government announced a two-month, $1.5 billion stimulus package, including discounts on sea, air and train travel, handouts of staple foods and wage assistance for millions of workers. The president’s goal is to rev up the trillion-dollar-plus economy’s growth rate to 8 percent.
Mr. Prabowo also argues that his school lunch plan — which would be the world’s second-biggest, after America’s — will bolster the economy. He has called the program an investment in Indonesia’s future that will help reduce poverty rates.
But the lunch program, which is in its early stages, has been dogged by controversy. Hundreds of children have gotten food poisoning, regulators have raised concerns about accountability and corruption, and critics say it will be very hard to ensure that every school in Indonesia’s vast archipelago is covered.
“This program is a financial time bomb for the government,” said Bhima Yudhistira, the director of the Center of Economic and Law Studies, an independent research institute in Jakarta. Spending more on teachers’ compensation and improving transportation links to schools are more urgent needs, he said.
Mr. Prabowo has defended his actions.
“Our economic management control is quite prudent, quite careful,” he said in May. “One thing we can and should be proud of is that we have implemented massive savings,” which he said would help fund his flagship projects.
But Mr. Prabowo has been forced to drastically reduce the size of the lunch program, to $28 billion this year from about $45 billion. On Tuesday, his government acknowledged that the budget deficit would be the largest in decades, excluding the pandemic years.
Public dissatisfaction is evident. In February, students held a nationwide campaign of demonstrations called “Indonesia Gelap,” or Dark Indonesia, protesting the government’s austerity-driven cuts and other policies while demanding an independent review of the costly free lunch program.
In recent months, the hashtag #KaburAjaDulu, or Just Flee, has gone viral, reflecting young Indonesians’ frustration over limited job opportunities, the high cost of education and low salaries. Many see working abroad as a way to a better life.
Protesters also denounced the military’s widening role in government under Mr. Prabowo, a former general whose election raised fears for Indonesia’s young democracy. He has been accused of committing war crimes during Indonesia’s occupation of East Timor and of being involved in the disappearance of Indonesian pro-democracy activists. In May, Parliament passed legislation that allocated more civilian posts to military officers.
“The current situation is being made worse by government policies where there are many blunders with policy strategies or controversial laws,” Mr. Bhima said. “The main issues, corruption or legal uncertainties, for example, are never discussed.”
On paper, Indonesia, the world’s fourth largest country by population, would seem to have demographic advantages, because more than two-thirds of its 270 million people are of working age.
Mr. Prabowo’s predecessor, Joko Widodo, tried to transform the economy by banning the export of nickel, of which it has the world’s largest reserves. His ambition was to create a domestic industry that would process nickel ore and use it to make batteries for electric cars — and create plenty of good jobs. But while billions of dollars from overseas have been invested in such projects, the country has yet to see widespread benefits.
“The development of the Indonesian economy, especially in the past decade, has not gone well,” said Mr. Awalil, the economist. “The demographic bonus has slowly turned into a demographic burden.”
To many Indonesians, the future looks bleak. Ms. Nina, the marketer, said turning to the state for assistance was not an option.
“To expect something from the government?” she said. “I have lost hope.”
Muktita Suhartono reports on Thailand and Indonesia. She is based in Bangkok.
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