Economic observer Yanuar Rizky said that the five consecutive deflation experienced by Indonesia is currently due to the continuing decline in people’s purchasing power, especially the middle class. The government is advised to immediately find a way out, not busy entertaining itself by issuing statements that are not substantive.
“This deflation must be seen from the most basic problem, namely the disruption of the middle class. Ministers should not comfort themselves in the middle of a squeezed middle class,” said Yanuar, Saturday (5/10).
Based on data from the Central Statistics Agency (BPS), Indonesia’s deflation since May 2024 was 0.03%, continuing to June at 0.08%, July 0.18%, August 0.03% and September 0.12%.
Also read: The government should not be busy entertaining itself amidst the danger of deflation
Minister of Finance Sri Mulyani Indrawati said that the deflation that occurred for five consecutive months was in line with the government’s expectations because it had succeeded in controlling food prices which had been volatile. Likewise, the Minister of Trade, Zulkifli Hasan, believes that successive deflation occurred not because purchasing power decreased.
Yanuar explained that the government must read various supporting data in interpreting deflation data from BPS. The consumer price index (CPI) also released by BPS shows a weakening of people’s purchasing power. This can be seen from the decline in the CPI, from 106.37 in May 2024 to 105.93 in September 2024.
Other supporting data is the Indonesian manufacturing purchasing manager’s index (PMI) released by S&P Global. Indonesia’s manufacturing PMI contracted for three consecutive months with a score below 50. July 2024 was the start of Indonesia’s manufacturing PMI entering the contraction zone with a score of 49.3, August 48.9, and September only rose slightly to 49.2.
Also read: The government ensures that it continues to monitor people’s purchasing power
Likewise, data from the Deposit Insurance Corporation (LPS) shows the ‘savings eating’ phenomenon. This can be seen from the average balance for groups of accounts with balances under IDR 100 million in June 2024 reaching IDR 1.5 million. This figure has dropped compared to 2019 which was IDR 3 million.
“These data show that the weakening of people’s purchasing power is increasingly clear, because wages are lost due to layoffs, followed by the withdrawal of middle class savings balances,” explained Yanuar.
According to him, if the government continues to ignore this problem, it will trigger turmoil in the middle class. It is feared that this condition will be the same as the situation during the Asian economic crisis in 1998.
“There is an urgent agenda for the new government, how to signal optimism about purchasing power by opening up access to wide employment opportunities,” concluded Yanuar. (Z-11)
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