Najla Nur Fauziyah, Jakarta – Tauhid Ahmad, an economist from the Institute for Development of Economics and Finance (Indef), said the waning of Indonesians' purchasing power in the last few months shadows the start of President-elect Prabowo Subianto's government.
Tauhid believes it will be difficult to surpass 5 percent of economic growth during the third and fourth quarters of 2024, despite a strong start in the year's first half. However, recent deflation and economic pressure mark an economic slowdown.
"The third and fourth quarters will likely drop below five percent. Thus, in aggregate, our economic growth is stuck at five percent," Tauhid told Tempo on October 3, 2024.
According to him, this condition will affect the beginning of Prabowo's administration as welfare declines along with the economic downturn. "Poverty and unemployment will worsen as the multiplier effects (of economic downturn)," he said.
Previously, Statistics Indonesia (BPS) recorded a 0.12 percent drop in the September 2024 Consumer Price Index (CPI), marking the fifth month of deflation since May 2024.
Deflation is visible from the volatile food categories such as broiler chicken, eggs, and shallots. "When people don't have purchasing power, they end up not being able to afford these products, causing prices to fall, which then becomes deflation," Tauhid said.
In September 2024, the Indonesian manufacturing Purchasing Manager's Index (PMI) plunged into the contraction zone of 49.2, indicating that fewer goods are sold compared to the inputs purchased by the industry. This means excess stock due to the lack of buyers. This condition, however, is not only occurring in Indonesia.
"Two-wheeled vehicle purchases contracted 4.1 percent, as well as the credit rates, which recorded a minus," he concluded.
– Hammam Izzudin