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Jakarta Post

The annual spending spree

Editorial Board (The Jakarta Post)
Jakarta
Fri, May 31, 2019

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The annual spending spree Homebound: People get ready to board a train heading for Surabaya, East Java, at Pasar Senen Station in Jakarta on Tuesday. Called Mudik Bareng BUMN 2019, the homecoming program is organized by the State-Owned Enterprises Ministry and is expected to send home 250,338 travelers for Idul Fitri celebrations. (The Jakarta Post/Seto Wardhana )

B

ank Indonesia (BI) has put banknotes worth Rp 300 trillion (US$20.68 billion) in circulation over the past two weeks specifically to meet the needs of consumers for the Idul Fitri holiday season, which starts next week in the Muslim-majority country.

The Finance Ministry confirmed last week that it had disbursed Rp 20 trillion in holiday bonuses (THR) for Idul Fitri to all government employees, including the military and police. Likewise, private companies have been required to provide THR worth at least one month’s salary to their employees.

Further, remittances from Indonesian workers, notably from those in the Middle East, Hong Kong, Taiwan, Singapore and Malaysia, also peaked last week. BI recorded $10.97 billion in total remittances from Indonesian workers last year, up significantly from $8.8 billion in 2017. But information is not yet available on remittances throughout Indonesia over the past four weeks.

However, referring to the West Java district of Cianjur as an example, remittances nationwide should have been quite huge as well. The Cianjur post office reported over the past week it delivered Rp 5 billion daily to local families, up from the normal average daily of Rp 1 billion. That is just one district, while Indonesian migrant workers hail from hundreds of districts.

The period that spans the start of the Ramadan fasting month on May 6 through the 10-day Idul Fitri collective holiday from May 30 to June 9 is the peak shopping season in this Muslim-majority nation. Most shopping malls, grocery stores and supermarkets typically book nearly 50 percent of their annual sales during this period.

In addition to massive consumer spending during Ramadan, billions of dollars will also be pumped into regional economies during the festivities, notably in Java, Sumatra, Kalimantan and Sulawesi, as tens of millions of urban and migrant workers join other revelers to celebrate the religious feast day with family and relatives in their hometowns.

This development is partly a result of the country’s transformation from a largely agricultural, rural economy into a modern, urban one. It is also a kind of income redistribution to rural areas, where most of the extremely poor people live.

It is no wonder that most people look at Idul Fitri and its massive mudik(homebound exodus) tradition as a reflection of cultural, social and economic dimensions, in addition to its religious and spiritual meaning.

As in past years, the spending spree will generate many good things for the economy, which has been experiencing one of its lowest growth rates as exports slump amid the recession in Europe and the rapid slowdown in China, the world’s second-largest economic locomotive.

The rationale is that consumption effects production, and production effects consumption. Without consumption, there is no production because what is produced would remain unconsumed, but without production there is nothing to consume, either.

The spending spree will certainly help economic growth to offset the anticipated stagnancy in investment, as businesspeople are still waiting for the Constitutional Court’s decision in June on who is to be president-elect.

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