JakartaGlobe-Aug 18
Indonesia’s middle class is shrinking, raising concerns about the sustainability of Southeast Asia’s largest economy, an analyst said Monday. Eko Listiyanto, director of big data development at the Institute for Development of Economics and Finance (Indef), warned that the government has largely overlooked the middle-income group despite its crucial role in driving household consumption. “The purchasing power of the middle class needs to be supported with incentives such as electricity discounts, public transportation subsidies, or lighter tax burdens,” Eko told Beritasatu.com on Monday. “If their purchasing power improves, household consumption could accelerate in line with the economy’s growth target of around 5 percent.” Household spending is the backbone of Indonesia’s economy, accounting for 54.25 percent of gross domestic product in the second quarter of 2025, according to the Central Statistics Agency (BPS). Consumption contributed 2.64 percentage points of the country’s 5.12 percent growth during the period. But the number of Indonesians in the middle class has declined over the past five years, falling from 57.33 million in 2019 to 47.85 million in 2024, BPS data show. Consumption growth has also slowed to below 5 percent, suggesting weaker demand among households that typically provide stable spending. Eko cautioned that neglecting this group could push more families into poverty, further weakening domestic demand. “Without incentives for the middle class, their numbers may continue to decline, and so will their contribution to GDP,” he said.
He also urged that social assistance programs for low-income households be designed to help recipients achieve economic independence. “We need to help poor households graduate from welfare by improving skills, access to capital, and market opportunities for jobs or entrepreneurship,” Eko said. Read more at: https://jakartaglobe.id/business/indonesias-shrinking-middle-class-threatens-growth-consumption#goog_rewarded
