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View all search resultsSolid fundamentals mask economic hardship felt by many: CSIS
Rising spending among the wealthy while middle-class consumption loses steam suggests overall purchasing power is failing to keep pace with GDP growth.
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A customer passes by a rack of sweetened drinks in a supermarket in Jakarta on Dec. 14, 2023. (Antara/Cahya Sari)
I
ndonesia has recorded resilient economic fundamentals in the first six months of this year, but many households still grapple with weak spending power and depleted savings, according to the Jakarta-based think tank Centre for Strategic and International Studies (CSIS).
CSIS researcher Deni Friawan said in a media briefing on Thursday that the country’s economic growth remained above expectations, even as the gross domestic product recorded in the second quarter deteriorated to 5.29 percent year-on-year (yoy) from 5.61 percent in Q1.
Read also: GDP target a tall order after growth slowdown
The economic growth was mainly driven by consumption, government spending and investment amid weak exports. However, Deni said the expansion was not broad-based.
High domestic consumption was coupled with declining household savings and rising debt amid widening wealth inequality. Deni pointed to increasingly polarized deposits, noting that balances in small accounts holding less than Rp 100 million (US$5,595) kept shrinking, while those above Rp 50 billion grew by roughly 40 percent.
“Spending among upper-income consumers is increasing while spending among the middle class is slowing down, indicating that [overall] people’s spending power is not keeping up with GDP growth,” he explained.
He argued that this issue is fueled by worsening job quality, as employment is increasingly shifting toward the informal sector, where workers typically earn lower and less stable incomes.
