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Tepid middle-class growth casts doubt on economic ambitions
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Women use smartphones at the entrance of Tanah Abang Market, Southeast Asia's largest wholesale shopping center for garments and textiles, in Jakarta on Sept. 28, 2023. (AFP/Yasuyoshi Chiba)
T
he middle class is not expanding fast enough to meet ambitious development goals, experts and businesses warn, which could scupper President Prabowo Subianto’s plans to boost economic growth to 8 percent and make Indonesia a developed country by 2045.
The 2025-2029 National Medium-Term Development Plan (RPJMN) aims for a mere 20 percent of Indonesians to be in the middle class by the end of 2029, a far cry from the 38 percent targeted by the same deadline according to the 2025-2045 National Long-Term Development Plan (RPJN) published last year.
The long-term plan then aims to lift that share of the population to 80 percent by 2045.
Lowering the bar for middle-class growth reflects the government’s struggle to address critical economic vulnerabilities: stagnant productivity and a shortage of formal jobs, according to Biyan Shandy, a researcher at Jakarta-based think tank Center for Indonesian Policy Studies (CIPS).
“Income instability has destabilized the middle class, resulting in a reduction of overall household spending, most notably a decrease in goods consumption by middle-class households,” Biyan told The Jakarta Post on Wednesday, emphasizing the impact on demand for nonessential goods.
The middle class is key to economic growth, as its spending accounts for nearly 40 percent of private consumption, and more than 80 percent if combined with the so-called aspiring middle class, who spend US$57 to $132 a month.
Household consumption is targeted to grow by an annual 7.27 percent though 2029, but over the past five years it has struggled to pass the 5 percent mark, even as the economy bounced back after the coronavirus pandemic.
