Geopolitical Conflict and Indonesia’s Economic Stability

Abstract

Purpose: Global geopolitical turmoil creates uncertainty that has direct implications for Indonesia's economic stability. The gap phenomenon arises when the government's fiscal and monetary policies fail to fully anticipate external risks, particularly those related to fluctuations in energy prices, trade tensions, and regional political dynamics. This study aims to understand the relationship between geopolitical conflicts and national economic resilience.

Study Design/Methodology/Approach: This study use a qualitative approach with descriptive analysis, drawing on literature studies, secondary data, and official documents.

Findings: The findings indicate that fiscal discipline, export market diversification, and strengthening foreign exchange reserves are key strategies for mitigating external pressures. In addition, strict fiscal oversight and enforcement of public governance is crucial in preventing the erosion of the economic structure due to potential corruption. The theoretical implications of this study enrich the perspective of Prospect Theory by emphasising how risk perception and government decision-making shape the direction of macroeconomic policy. From a practical perspective, the findings provide a reference for policymakers to formulate anticipatory strategies against geopolitical shocks. The policy implications underscore the importance of striking a balance between short-term stability and sustainable development.

Originality/Value: The novelty of this research lies in the integration of geopolitical analysis with fiscal discipline as a key instrument to maintain Indonesia's economic resilience amid global uncertainty