Emerging Markets’ Fragile Five Are Breaking Bad Again, Bloomberg Opinion

Bloomberg Opinion By Shuli Ren, Bloomberg Columnist, March 21, 2025

Investors are looking beyond the US. But Indonesia and Turkey are not behaving well. 

It’s not a zero-sum game. Even as global investors spooked by Donald Trump’s unpredictable policies are trimming positions in US stocks, it doesn’t necessarily mean they will plow into emerging markets. Developing nations have to earn foreigners’ trust first.

Unfortunately, some of the biggest are shooting themselves in the foot…

(Excerpts)

Indonesia and Turkey, two members of the Fragile Five …, are back in the limelight…

On Tuesday, the Jakarta Composite Index witnessed its steepest intraday decline in more than a decade over speculation that the nation’s well-respected finance minister had decided to resign…

…Indonesian President Prabowo Subianto’s ambitious plan to create a new sovereign wealth fund, modeled on Singapore’s investment arm Temasek Holdings Pte, has alarmed investors. Jakarta already has a $20 billion wealth fund. But Prabowo wanted more.

The new one, called Danantara Indonesia, is a completely different animal. It will eventually manage $900 billion and house state-owned enterprises, including oil and natural gas producer Pertamina, PT Telkom Indonesia and PT Bank Mandiri. Bank Mandiri lost about one-third of its market value since Danantara was launched on Feb. 24.

Investors now fear Indonesia is losing the fiscal discipline established during former President Joko Widodo’s years. The law limits the government’s budget deficit to 3% of gross domestic product, but that was not enough for Prabowo’s big-ticket plans and his ambitious 8% growth target. Danantara could be a backdoor channel to borrow off balance sheet and spend. Analysts worry that Indonesians will be so spooked that they pull their deposits out of the three big SOE banks controlled by Danantara…

…But the Fragile Five’s fundamental weaknesses have not completely given away. Indonesia’s current account flipped back into the red last year, while the true level of the fiscal deficit has become a big mystery. …

…To attract overseas capital, Indonesia and Turkey need to lessen — not to amplify — their fragility.

Baca selengkapnya https://www.bloomberg.com/opinion/articles/2025-03-20/turkey-indonesia-emerging-markets-fragile-five-are-breaking-bad-again.

In related news:

• https://www.bloomberg.com/news/articles/2025-06-25/indonesia-on-track-to-keep-modest-budget-deficit-indrawati-says
• https://www.bloomberg.com/news/articles/2025-05-28/dalio-won-t-join-indonesia-fund-as-adviser-in-blow-to-prabowo
• https://www.bloomberg.com/news/articles/2025-05-25/china-indonesia-sovereign-wealth-funds-boost-investment-ties
• Indonesia to launch economic stimulus to boost consumption, Reuters May 24, 2025