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Indonesian consumer spending: Expecting an upward trend
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President Joko “Jokowi” Widodo (second right) symbolically delivers assistance to vendors as he visits Pasar Minggu Market in South Jakarta
on April 13, 2023.
(Antara/Hafidz Mubarak A)
S
tatistics Indonesia (BPS) released forecast-beating first-quarter Indonesian economic performance data on Friday. The economy grew at a rate of 5.03 percent year-on-year (yoy), higher than the previous quarter, suggesting continued economic recovery and resilience.
As the major contributor to GDP, household spending is worth discussing and has been highly correlated with the consumer spending behavior in the last three years, especially during the pandemic.
The first quarter number, once again, confirmed our view that ensuring domestic mobility and accelerating government spending would play an important role in economic recovery. Last quarter, the rebound in government spending supported consumption after the subsidized fuel price hike. This indicated a shift of the source of growth from the external sector (commodity-related exports) to the domestic sector.
In terms of consumer spending, performance was quite resilient in the first quarter as it managed to expand by 4.54 percent yoy, versus 4.48 percent yoy in the fourth quarter of last year.
The fasting month of Ramadan, which started in the last week of March, also had a positive impact on spending.
In fact, the current consumption resilience has been seen since 2022. It has laid a solid groundwork, and reliable indicators hint at an optimistic future. Despite the Omicron explosion in early 2022, consumer spending continued its upward trend.
Indeed, when the government reduced the fuel subsidy, which led to rising prices, consumer spending was remarkably stable for at least six weeks, as indicated by the Mandiri Spending Index (MSI). With mobility restrictions lifted, we see consumer spending in 2023 being at least as robust as in 2022.
