Indonesia is facing a rapid decline in its middle-class population, posing significant challenges to the nation’s economic goals. Recent data shows a stark decrease in this crucial demographic, with the middle class shrinking from 21.45% to 17.13% of the population between 2019 and 2024.
The Economic and Social Research Institute at the University of Indonesia reports an even more dramatic drop of over 8.5 million individuals since 2018. As the backbone of the economy, the middle class in Indonesia contributes significantly to domestic consumption.
With concerns about reduced consumer spending and slower economic growth mounting, the World Bank emphasizes the importance of a robust middle class for overall economic welfare. Factors contributing to this decline include the impact of the COVID-19 pandemic, global economic slowdowns, job losses, stagnant wage growth, rising living costs, and government policies.
Challenges and Future Prospects
The Job Creation Law, meant to stimulate employment, has not delivered on its promises and has led to layoffs and declining purchasing power. The potential social implications of financial struggles among the middle class are worrisome.
To reverse this trend, economists suggest focusing on broad-based economic growth, improving institutional quality, reducing wealth concentration, and creating high-value jobs in the formal sector. As Indonesia aims to achieve developed nation status by 2045, revitalizing its middle class will be crucial for its economic and social stability.
This decline not only affects economic progress but also jeopardizes social stability and national aspirations. The coming years will be critical as Indonesia works to rebuild its middle class and secure its future prosperity.
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