JakartaGlobe-Oct 7
NH Korindo Sekuritas warns that the ongoing deflation trend poses urgent concerns for the Indonesian economy, suggesting that the working class has limited disposable income for spending. Indonesia reported a year-on-year inflation rate of 1.84 percent for September, a decrease from 2.12 percent in August. September’s 0.12 percent deflation marks the fifth consecutive month of deflation since May 2024. “Economists believe this could hinder Indonesia’s gross domestic product (GDP) from maintaining a growth rate of 5 percent if reliant solely on consumer spending,” NH Korindo Sekuritas stated in a report on Monday.
In response to these economic challenges, President-elect Prabowo Subianto and Vice President-elect Gibran Rakabuming Raka are urged to take immediate action upon taking office. Suggested measures include providing incentives and organizing market operations to promote micro, small, and medium-sized enterprises (MSMEs). NH Korindo also recommends reevaluating policies related to downstream investment in capital-intensive sectors, which are perceived to have a limited impact on job creation. The sustained deflation and a contracting Purchasing Managers’ Index (PMI) can be attributed to a declining middle class in 2024, followed by an increase in impoverished individuals. The middle class plays a critical role in stimulating domestic economic activity. Sutrisno Iwantono, Chairman of the Public Policy Association of Indonesian Entrepreneurs (Apindo), remarked that this trend indicates an increasing concentration within Indonesia’s industrial sector. According to the National Socioeconomic Survey (Susenas), as of March 2024, Indonesia’s middle class comprised 47.85 million people (17.13 percent), with an additional 137.50 million people (49.22 percent) on the verge of entering the middle class, representing a combined 66.35 percent of the population. Over the past five years, the proportion of formal middle-class workers has slightly decreased, from 61.71 percent in 2019 to 59.36 percent in 2024. Currently, the middle class and those transitioning into it contribute 81.49 percent of national consumption. Read more at:
