PUSAT FURNITURE KANTOR
Recession 2025: Global Storm Hits Indonesian MSMEs Mercilessly!
With the escalating Russia-Ukraine crisis, the Fed's interest rate hike, and the El Niño phenomenon affecting the global climate, Indonesia must once again face its biggest enemy: the 2025 economic recession. Why? Bank Indonesia stated that the projected economic growth is slowing to 4.2%—the lowest figure in the last decade. However, this crisis is apparently more severe than before, which is more challenging for MSMEs. The 2025 recession is predicted to challenge MSMEs, the backbone of the national economy, contributing 61% of GDP.
The Balkan War between Russia and Ukraine has proven to cause a drastic spike in global commodity prices. First, wheat prices rose 25%, while imported soybeans—a key raw material for the tempeh and tofu industry—slumped by 30%. This chaotic situation worsened when the Fed issued a 6.5% interest rate policy, crippling the rupiah to Rp 16,500/USD. This undoubtedly made the cost of importing raw materials for MSMEs even more prohibitive. Furthermore, the weather became even more hostile with El Niño, which affected chili and onion harvest failures in Java, forcing MSMEs to import at double the price.
The impact is palpable: Indonesia's core inflation is predicted to reach 6.8% in 2025, a staggering figure! People should be preparing for the crisis, tightening their belts, and prioritizing non-essential spending. An IPSOS survey found that 45% of consumers plan to cut back on secondary needs this year. For MSMEs, most of which rely on imported raw materials (Ministry of Cooperatives and SMEs), this isn't just a boxing challenge. It's a clear sign of defeat before the fight.
The author had the opportunity to speak with William Putra (29), the owner of a coffee shop in the Gedangan area, Sidoarjo Regency. He stated that the 40% increase in the price of imported milk forced him to raise the price of various types of coffee milk drinks, from Rp. 26,000 to Rp. 33,000. This price increase caused his customer base to decrease by 50%, while operational costs also increased overall. "Previously, I could make an average profit of Rp. 10 million/month. Now, it's very little, sir. At most, it's enough to cover our employees' salaries and operational costs. After all, they have to be a priority for our welfare," he said.
Amidst this situation, critical statements have emerged: Is the government sufficiently responsive in protecting MSMEs? Food subsidies, the lack of digitalization incentives, and the reliance on imports demonstrate that current policies are merely empty promises. Ministers appear elegant in their speeches to alleviate public stress. Without radical change, the Chamber of Commerce and Industry (Kadin) estimates that 30% of MSMEs will close down within two years.
On the other hand, Indonesian MSMEs offer a significant opportunity to not only survive but also thrive. The key is adapting to change and building strong relationships with customers. The recession, which has buried many paths, will ultimately give rise to new ones. While difficult and seemingly unfamiliar, at least micro and medium-sized entrepreneurs have bright prospects. Part 1: How Can MSMEs Succeed and Thrive?
The first step is digitization and opening up a limitless market. The story of Surakarta-based Hadinata Batik proves that this is a real solution that brings results. Starting with TikTok Shop and Tokopedia Shop, their turnover skyrocketed 1000%. The batik brand provides a variety of batik fabrics and ready-to-wear batik clothing for various consumers, including women, men, and children. The batik marketed includes batik, stamped batik, and hand-drawn batik. MSMEs don't need a lot of capital to get started—simply using Live selling on Facebook or WhatsApp Business can be the first step. Collaborating with micro-enterprises with a profit-sharing system (10-15% per sale) is also effective in reaching Gen Z.
Next, diversify and create a business ecosystem. Creative Digital Printing from Sleman, Yogyakarta, is an inspiring example. The digital printing business, which nearly collapsed during the 2020 pandemic, is now successfully selling online office stationery and graphic design services. The key is listening to customer complaints and being active on social media. A simple survey via Google Form given to every customer who makes a purchase can reveal customer satisfaction levels and the need for new product ideas. For example, a coffee MSME might sell a "Coffee + Snacks" package with a 20% discount (with a certain minimum purchase amount) or collaborate with other MSMEs to create a unique "Batik + Wood Crafts" package. Diversification isn't just about adding products, but also addressing customer concerns in creative ways.
Third, build loyal customers, because they are an investment. The "Recovery Kopi" coffee shop from Banyumas proves that customer loyalty can be a lifesaver in difficult times. With the right customer market, they provide points cards with every coffee purchase. These points can be exchanged for discounts or exclusive merchandise, such as t-shirts and stylish bags. As a result, nearly 60% of customers return weekly and help promote the shop to their acquaintances. Their top tip is to send birthday greetings to customers plus discount vouchers via WhatsApp.
Part 2: The Role of Government – Helping MSMEs or Just a Political Necessity?
Once MSMEs have a new path, the government, as regulator, must also issue new policies that support them. During the previous recession, the government often claimed to be on the side of MSMEs through social assistance and subsidy programs. However, the reality on the ground contradicted their claims. For example, the assistance provided was poorly targeted, merely a political gimmick, and failed to address the root of the problem. Instead of being a savior, government policies felt like a band-aid on a festering wound—they seemed to help, but they didn't heal.
Take the People's Business Credit (KUR) program, for example. Throughout 2024, only 60% of the Rp 140 trillion KUR funds were utilized. The reasons? Complicated administrative requirements, asset collateral that is beyond the reach of MSMEs, and interest rates that are quite burdensome by small business standards (6% per year). In comparison, in Vietnam, microcredit for MSMEs carries an interest rate of only 3%, with a disbursement process of three days—no collateral required. As a result, Vietnamese MSMEs now contribute 45% of national exports, while Indonesia remains heavily dependent on imports.
Ironically, a large budget is allocated for a program that makes no sense, let's just say it's idiotic! In 2024, the Ministry of Cooperatives and SMEs allocated IDR 1.2 trillion for social media content creation training for MSMEs. However, this training was not accompanied by affordable internet access, digital equipment subsidies, or technical assistance. As a result, thousands of MSMEs became mere spectators of TikTok trends, unable to sell a single product.
Government-private collaboration, which should be a priority, appears half-hearted. Tokopedia's "1% admin fee" program for MSMEs in the fourth quarter of 2024 is commendable. However, this is only valid for three months, even though the recession is expected to persist until 2026. Compare this to Malaysia, where the government and private sector are implementing a "5-Year MSME Digitalization" program with a 50% subsidy on logistics costs, ongoing training, and global market access. This program has borne fruit, with 65% of Malaysian MSMEs already on-board by 2024 (Shopee Malaysia). Meanwhile, Indonesia's figure remains at 35%.
So, what can the government do?
Reduce VAT for MSMEs from 11% to 10%, particularly in the food and textile sectors. Thailand successfully maintained MSME growth during the 2023 recession with its gradual VAT reduction policy.
Second, dismantle the logistics monopoly. Inter-island shipping costs in Indonesia are three times higher than in all ASEAN countries. This is due to the dominance of certain shipping companies in specific shipping routes. The government must open the floodgates of competition to reduce distribution costs.
Divert the "content training" budget to building internet networks in villages with MSME centers, such as those producing Batik Lasem or Tenun Flores. This policy will significantly impact any MSME seeking affordable, fast, and secure internet access to market their products digitally.
Finally, stop ceremonial programs. Replace social assistance distribution with tangible incentives for the community, especially MSMEs. This could start with vouchers for raw material purchases or a 25% electricity subsidy specifically for home industries with production machinery.
If the government continues to make promises instead of structural solutions, it will be like giving MSMEs a parachute with holes in it. And of course, the Indonesian Chamber of Commerce and Industry (Kadin)'s prediction that 30% of MSMEs will close by 2026 is no mere figment of the imagination. The 2025 recession is a real test: will the government be there for MSMEs, or will it simply be a latecomer, busy distributing food packages while turning a blind eye?
Conclusion: A True Victory in the Boxing Fight Against Recession
The 2025 recession will be a real test for MSMEs: survival is not just about making a profit, but also about changing mindsets. Digitalization is no longer an option, but a necessity—the government cannot be fully relied on, while assistance programs like the People's Business Credit (KUR) and content training often fail to address the root of the problem. MSMEs must be agile in innovating, diversifying products, and building customer loyalty through personal interactions. Meanwhile, the government needs to stop distributing symbolic food packages and shift to real incentives: cut MSME taxes, break down raw material monopolies, and subsidize digital infrastructure. If both parties don't act quickly, 30% of MSMEs are predicted to collapse within two years. This crisis is a moment for transformation: MSMEs must dare to step out of their comfort zones, and the government must listen to the real voices of business actors. Don't be spectators in your own country—act now, or become a victim of the recession!
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