Efek Domino Daya Beli dan PMI Ambruk, Hingga Kelas Menengah Jatuh Miskin

Summary

The Indonesian economy faces challenges as President Joko Widodo's term nears its end. A decline in consumer purchasing power, particularly among the middle class, is exacerbated by four months of consecutive deflation. The manufacturing PMI has contracted for two months, indicating a crisis not seen since 1999. The post-pandemic recovery has been hindered by a significant drop in the middle class, affecting over 9 million people. The government's economic support for the middle class is not as substantial as for the lower class, leading to a decrease in their consumption contribution to GDP. The crisis affects various sectors, including B2C sales, automotive, and manufacturing, with potential long-term impacts if not addressed.

Takeaways

• 📉 Economic concerns are rising in Indonesia due to a decrease in purchasing power, especially among the middle class.
• 🔍 Deflation has been recorded for four consecutive months, affecting the manufacturing PMI for two months in a row.
• 📈 The impact of the post-COVID-19 pandemic is significant, with the Indonesian economy experiencing a drastic drop during its peak.
• 🏘️ The middle class, which is a major consumer group, has seen a reduction in income, affecting more than 80% of total household consumption in Indonesia.
• 💸 The contribution of middle-class consumption to GDP has decreased from 41.9% in 2018 to 36.8% in 2023.
• 📊 The purchasing power of the middle class is being squeezed, with a shift towards lower-priced goods and services.
• 🌾 Factors contributing to the weakness of the middle class include stagnant wages in the face of high inflation and food prices.
• 🍦 Sales in the B2C sector, such as ice cream sales, are seeing a positive growth for lower-priced items but a decline for higher-priced ones.
• 🚗 The automotive industry is also affected, with a significant drop in motorcycle sales but an increase in car sales.
• 🏭 The manufacturing sector is in crisis, with the PMI indicating contraction for two consecutive months, leading to mass layoffs and further pressure on consumer spending.
• 💼 The government is urged to take immediate action to prevent further weakening of purchasing power, including potential adjustments to VAT and fuel subsidies.

Q & A

What is the current economic concern in Indonesia highlighted in the script?

The current economic concern in Indonesia is a decline in purchasing power due to deflation for four consecutive months and a drop in the manufacturing PMI for two consecutive months.

How has the COVID-19 pandemic affected Indonesia's economy according to the script?

At its peak, the COVID-19 pandemic caused a drastic decline in Indonesia's economy, with growth dropping to 5.3% year-on-year, affecting all components.

What is the impact of the shrinking middle class on Indonesia's economy?

The shrinking middle class impacts Indonesia's economy significantly as it contributes to over 80% of total household consumption in the country.

What are the two main reasons behind the weakening purchasing power of the middle class as mentioned in the script?

The two main reasons are the increase in the proportion of part-time workers, leading to lower wages, and the inability of wage growth to keep up with inflation, particularly due to high food prices.

How has the deflating economy affected consumer behavior as per the script?

Consumer behavior has shifted towards purchasing more affordable products, with sales of ice cream priced below 5000 Rupiah growing faster than those above 10,000 Rupiah.

What is the current state of the manufacturing sector in Indonesia?

The manufacturing sector is in a state of contraction as indicated by the Purchasing Manager Index (PMI) which has been in negative territory for two consecutive months.

How has the automotive industry been affected by the economic downturn?

The automotive industry has experienced a decline in credit car sales and an increase in motorcycle sales, with total motorcycle sales from January to June 2024 dropping by 49% compared to the same period last year.

What is the potential long-term impact of the current economic situation on Indonesia's middle class?

If the situation continues, it is predicted that the middle class will be further eroded, with more people falling into poverty.

What steps does the script suggest the government should take to address the economic crisis?

The script suggests that the government should take steps to reduce the increase in PPN (Value Added Tax) and BBM (fuel) subsidies to prevent further weakening of the purchasing power of the people.

What role can Bank Indonesia play in alleviating the economic situation according to the script?

Bank Indonesia can provide monetary relaxation, such as reducing net interest margins, which would decrease the burden of loans on the middle class and potentially boost their purchasing power.

What is the potential impact of the current economic challenges on Indonesia's projected economic growth?

The current economic challenges could threaten Indonesia's economic growth target, with projections suggesting a slowdown in growth to around 4.9% to 5%, down from an initial projection of 5.1%.