“Our country continues to face all sorts of disturbances, including the MSCI. They are trying to intimidate us,” Prabowo said during an address to his cabinet. “I simply want to tell MSCI: the Indonesian nation fears no one and will never back down.”

“We have the strength, the courage and we are willing to make sacrifices, and we refuse to surrender,” he added.

On Oct. 15, MSCI said it was considering downgrading Indonesia to “standalone” status, which would exclude the Southeast Asian country from its major global and regional indexes. The index provider cited “continued suspected coordinated trading behavior and lack of evidence of meaningful enforcement.”

As many investors use MSCI’s indexes as the basis for their funds, a downgrade could lead to billions of dollars of investment fleeing the country. A final decision on Indonesia’s status will come by the end of June 2027.

Indonesia has labored under the threat of a downgrade for most of 2026. In January, the index provider said it was considering lowering the country to “frontier” status, one rung below the country’s current “emerging” status. That downgrade threatened to pull as much as $13 billion in passive investment flows from the country. The current MSCI proposal—which would downgrade the country below “frontier”—would likely lead to even greater outflows.

The Jakarta Composite Index is down by more than 10% since MSCI announced its proposal. The benchmark index is down nearly 40% for the year so far.

Mounting pressure

The MSCI reclassification is only the latest challenge to Prabowo, now entering his third year in office. His approval rating has dropped to just 44.5%, according to a poll from Saiful Mujani Research and ​Consulting cited by Reuters, primarily due to public dissatisfaction over the state of the economy. The same pollster put Prabowo’s approval at 81% in November. 

More than six in 10 Indonesians say they are unhappy with Indonesia’s free meal program, one of the president’s flagship social policies. Seventy-one percent also doubt that his village cooperatives policy—which plans to establish hubs in roughly 80,000 communities to handle basic-goods distribution, savings, and other rural services—would succeed. 

Wildfires in Indonesia are also the source of widespread haze that’s blanketing much of the region and making Southeast Asian cities such as Singapore and Kuala Lumpur among the world’s most polluted. Singapore is now threatening to prosecute companies responsible for the wildfires.

Prabowo recently admitted that he’s open to foreign help to control the fires. But he’s also bristled at criticism. “Indonesia is a polite and patient nation. Our country is often insulted, but believe me, our nation does not want to be insulted all the time,” Prabowo said at Wednesday’s cabinet meeting.

Indonesians are increasingly protesting Prabowo’s administration. Reuters reports that more than 9,000 police officers were deployed across Jakarta this week, ahead of events marking Prabowo’s second year in office. 

Diplomatic flashpoint

The market turmoil is now becoming a diplomatic  issue. Former trade minister Muhammad Lutfi—who served under presidents Susilo Bambang Yudhoyono and Joko Widodo—accused Singapore state investors Temasek and GIC of pressuring MSCI to trigger a sell-off, so that foreign investors could “scoop up our strategic assets at discounted prices.” 

Both entities denied the allegations, with a Temasek executive calling them “patently untrue.”

The spat is forcing Indonesian market officials to play damage control. Jeffrey Hendrik, president director of the Indonesia Stock Exchange (IDX), pushed back against the conspiracy claims on Oct. 20.

“We have always believed, and continue to believe, that global index providers are independent,” Hendrik said.