JAKARTA – Recent data from Indonesia’s Central Statistics Agency (BPS) has highlighted a significant contraction in the country’s middle class, with an estimated 9.5 million people falling out of this socioeconomic bracket since 2019. This decline is attributed to a confluence of factors, including the lingering effects of the COVID-19 pandemic, job losses particularly in the manufacturing sector, and a recent hike in the consumption tax. The BPS redefined the middle class as individuals spending between 2 and 9 million rupiah per month, which has led to a shift in the demographic landscape, with the traditional middle class decreasing while the aspiring middle class has seen an increase by approximately 8.65 million.

The pandemic has undeniably played a pivotal role, disrupting industries and leading to widespread layoffs. The manufacturing sector, a cornerstone of Indonesia’s economy, has been particularly hard-hit, resulting in diminished job opportunities and financial insecurity for many. Additionally, the increase in the consumption tax has further strained the purchasing power of the average Indonesian, leading to reduced consumer spending and a knock-on effect on small businesses, many of which report income losses of up to 60 percent.

President Joko Widodo has acknowledged the dual threats of inflation and deflation, emphasizing the need for careful economic management as he approaches the end of his term. The challenge lies in stimulating growth while ensuring that the benefits of economic recovery are equitably distributed across the population.

The situation in Indonesia is reflective of broader economic trends within the ASEAN region. While some ASEAN countries have shown resilience and growth, disparities remain. The ASEAN region’s combined GDP has increased, indicating a thriving collective economy. However, the wealth distribution and individual member states’ economic health vary significantly. For instance, while countries like Vietnam and the Philippines have experienced economic expansion, others are grappling with challenges similar to those faced by Indonesia, suggesting that the issues facing Indonesia’s middle class are not unique within the region.

In conclusion, the economic challenges facing Indonesia’s middle class are multifaceted and indicative of systemic issues that extend beyond its borders to other ASEAN countries. As the region moves forward, it will be crucial for policymakers to address these challenges with targeted strategies that promote inclusive growth and sustainable economic development. (zai)