Early Year Deflation, Purchasing Power Decreases

"The decline in the purchasing power of the people is reflected in the deflation that occurred at the beginning of 2025. Although the government considers deflation as a sign of successful price control, economists actually assess that this condition more accurately reflects the weakness of consumer spending." 

This is evident in the impact of weakened purchasing power on the manufacturing sector. In addition, the pressure in this sector significantly contributes to the rising unemployment rate.

In early 2025, nearly 14,000 formal workers lost their jobs due to a decline in the manufacturing sector. This affected household income and ultimately reduced the purchasing power of the public. 

This was revealed by the Professor of Management Science at Muhammadiyah University of Surakarta, Anton Agus. According to him, the decline in public spending has also impacted the trade and services sector. 

"This situation is exacerbated by global economic uncertainty in the aftermath of the COVID-19 pandemic, which continues to trigger economic crises, energy issues, and geopolitical tensions. He assesses that the government's steps to provide electricity tariff cuts and plan toll road subsidies during the Eid holiday are not sufficient to address the structural problems in the economy." 

In addition, the government provides grants to micro, small, and medium enterprises, as well as incentives for the manufacturing industry. This step is believed to help stabilize the economy in the short term.

Therefore, it is important to improve the investment climate in Indonesia. Although some policies are already in place, the investment climate that does not support industrial performance remains a barrier. One of the steps that need to be taken is to improve economic efficiency by reducing illegal levies (pungli) and corruption in the bureaucracy. 

What needs to be watched out for is the weakening of people's purchasing power, which is expected to continue to haunt the Indonesian economy throughout the year 2025. This is evident from the global conditions that are also facing crises such as economic, energy, and geopolitical crises.

 "Certainly, Indonesia as part of the global economy will definitely be affected by the impacts at various levels. This is something that clearly causes various economic pressures due to the decline in people's purchasing power."

The impact is that society tends to hold back consumption, both for primary needs such as food and for tertiary needs. As a result, demand for various goods and services weakens, which could potentially lead to more layoffs in the industrial sector. This is what needs to be anticipated.

"We hope that the purchasing power of the public will temporarily increase due to seasonal factors of Ramadan, government stimulus such as discounts on toll rates and flight tickets. In addition, the disbursement of THR for ASN and private workers has started since mid-March." 

Thus, throughout March 2025, the purchasing power of the public is projected to improve compared to the beginning of the year. However, it will still depend on the effectiveness of government policies in maintaining the stability of food prices and other essential goods.

Source : RRI

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