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49% of Indonesian Middle Class Sees Declines in Purchasing Power
News Desk (The Jakarta Post) November 1, 2024
People queue on March 12, 2024, to buy basic daily necessities at a cheap market event held by the government in Surabaya to maintain stable food supplies and prices. (AFP/Juni Kriswanto)
The Indonesia Market Outlook 2025 survey by Inventure revealed that 49 percent of the middle class has experienced a decrease in purchasing power.
Among those perceiving a decline, 85 percent attribute it to rising prices of essential goods, including food, energy and transportation.
"Buying a house and a car is a significant investment that requires long-term financial commitment," Inventure managing partner Yuswohady told an online press conference on Oct. 22, 2024, as quoted by Tempo.
Among the middle class, 70 percent of the respondents decided to delay buying cars while another 68 percent decided to delay buying and renovating house.
“Houses and cars are huge investments that need long-term financial commitment,” Yuswhohady said.
He added that such purchases were mostly financed by loans with years of installments. This is why the middle-class families decided to delay the purchase and maintain cash flow stability.
The survey involved 450 respondents from Greater Jakarta, Semarang, Surabaya, Medan and Makassar. Participants were primarily middle-class millennials and Gen Z, with data collected through interviews in September 2024.
Notably, 79 percent of respondents had monthly household expenditures ranging from Rp 2.1 million (US$134.5) to Rp 9.6 million. Additionally, 14 percent identified as aspiring middle class, spending between Rp 900,000 and Rp 2.1 million a month, while 7 percent classified as upper middle class, with expenditures exceeding Rp 9.6 million ($614.9) per month.
The survey also highlighted shopping behaviors among the middle class, with 71 percent of respondents reporting shopping at warung madura (traditional shops selling daily goods that allow people to purchase in small quantities).
Four out of five individuals cited accessibility as a primary reason for choosing these shops over modern convenience stores.
Separately, People's Consultative Assembly Deputy Speaker Eddy Soeparno suggested that the government reassess its decision to increase value-added tax to 12 percent in 2025.
Eddy argued that this policy could negatively impact the public's purchasing power.
"We from the National Mandate Party (PAN) faction will ask the government to review it and even postpone it if possible. I think we will agree on this matter," Eddy said on Sunday, as quoted by investor.id.
"This is so that people's purchasing power increases. If people's purchasing power is still strong, consumption will also increase."
Source: www.thejakartapost.com