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Jakarta Post

Indonesia beats China in consumer confidence

Benefiting from a recovery in global commodity prices, Indonesia has seen its consumer confidence, which rose at the second fastest rate among emerging markets, surpass China, a survey conducted by Credit Suisse Research Institute (CSRI) shows

Grace D. Amianti (The Jakarta Post)
Jakarta
Mon, June 19, 2017

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Indonesia beats China in consumer confidence

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span>Benefiting from a recovery in global commodity prices, Indonesia has seen its consumer confidence, which rose at the second fastest rate among emerging markets, surpass China, a survey conducted by Credit Suisse Research Institute (CSRI) shows.

In its seventh annual Emerging Consumer Survey conducted jointly with global market research firm Nielsen, the group found that Indonesia was ahead of China in income upgrade and stood just below India, making the three countries the highest ranked among five other emerging markets in the survey.

On household income changes in the last 12 months, Indonesia ranked at the top among eight countries surveyed, most likely because of the government’s fiscal incentive in the form of the increased non-taxable income (PTKP) threshold.

The policy enabled taxpayers to enjoy additional income worth Rp 1.5 million (US$112) between 2014 and 2016, the group stated.

“In addition to that, 30 percent of respondents felt optimistic that their personal finance would increase in the next six months, higher than the average 20 percent in the survey,” the group said in a statement on Friday.

Last year, the Directorate General of Taxation introduced a new PTKP threshold, which now stands at Rp 54 million a year, or Rp 4.5 million per month, higher than the previous Rp 36 million a year, or Rp 3 million per month.

Despite seeing a slight decline of 0.08 percent in the collection of income taxes from individual employees in April as a result of the new PTKP figure, the tax authority said it would eventually help increase value-added tax (VAT) revenue as people would be able to spend more, thereby partly offsetting the decline in income taxes.

In Indonesia, where private consumption accounts for more than half of its gross domestic product (GDP), the CSRI surveyed 1,534 respondents in 10 locations dominated by those living in urban areas at 66 percent, while the rest lived in rural areas.

The CSRI survey, based on its Emerging Consumer Scorecard, found that Indonesia recorded an average increase of 49 percent year-on-year (yoy) in confidence from 39 percent last year based on respondents’ current and future financial conditions.

The scorecard measures consumers’ sentiments on their medium-term expectations in five areas, namely personal finance, inflation, household income trends, desire to shop for things and earnings history.

The survey echoes what was found in Bank Indonesia’s (BI) latest consumer confidence index published in May, in which consumers found confidence in the current and future economic conditions. However, they slightly reduced their income for spending as they chose to save more money compared to the previous month.

Despite Indonesia’s rising consumer confidence, the survey states the country is still in its early stages on its path to take higher steps from more basic to discretionary consumption.

“We expect an increase in retail sales in the second half of this year supported by higher government spending and job creation,” said Credit Suisse retail analyst for Indonesia Ella Nusantoro.

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