Jakarta: Analysts have warned that Indonesia’s declining middle-class community is raising alarms in the country even as the federal implements a number of measures designed to support this population.
Additionally, the experts further stated that more assistance is required to support this demographic to stop a further decline.
In the last five years, the number of people who are classified as middle class has decreased by close to 9.5 million, according to the most recent data from the Central Bureau of Statistics ( BPS).
In 2019, the middle school people in Indonesia numbered at 57.33 million. According to BPS files, this number has decreased to 47.85 million in 2024.  ,
The middle class is defined as individuals whose monthly expenses, used as a proxy for income, range from 3.5 to 17 times above the poverty line, which according to the World Bank correspond to between 2 million rupiah ( US$ 130 ) and 9.9 million rupiah per capita.
” The middle class population began to decline after the ( COVID-19 ) pandemic, while the aspiring middle class increased”, Acting BPS Head Amalia Adininggar Widyasanti was quoted by Kompas on Wednesday ( Aug 28 ) as saying during a working meeting with the House of Representatives.  ,
The number of people who are classified as middle-class has increased in line with the decrease in the number of people who are middle-class, over the same period of five years.  ,
From 128.85 million in 2019 to 137.55 million this time, those who fall under the aspiring middle school category of the people increased. They form 49.22 per share of Indonesia’s people.  ,
Coordinating Minister for Economic Affairs Airlangga Hartarto said that these two parts  , make up about 66.6 percentage of the region’s inhabitants, and stressed the importance of the middle school for Indonesia’s business, describing it as the driving power for economic development.  ,
Mr. Airlangga made a speech at an economical discourse on the contribution of the Indonesian middle class to the Golden Indonesia 2045 perspective on August 27th. He emphasized the importance of increasing the purchasing power of the middle class, the weak, and, more important, the aspiring middle school.  ,
The Golden Indonesia 2045 perspective is a long-term strategy that aims to advance Indonesia and make it a prosperous nation by the anniversary of its 100th year of democracy.
To help the middle class, Mr Airlangga said that the government has implemented several efforts, including social security programs, tax subsidies, the Pre-Employment program, as well as the People’s Business Credit system, among others.  ,
One significant income opportunity, he said, is the administration’s plan to restore a total tax break on property purchases worth up to 5 billion rupiah for the second half of 2024.  ,
This policy, which covers the cost of value-added taxes on up to 2 billion ringgit of an available property’s value, was previously reduced to a 50 cent return after the complete coverage ended in June.
According to Mr. Airlangga, the policy change has already been approved by President Joko Widodo and aims to bolster the purchasing power of the middle class.
However, analysts said that beyond the lingering effects of COVID-19, other reasons that have contributed to a decline in Indonesia’s middle class population include weak national economic fundamentals, burdensome government policies, as well as the absence of a robust social safety net.
The Center for Economic and Law Studies ( Celios ), according to Mr. Bhima Yudhistira, the executive director of the organization.  ,
He explained to Kompas that the manufacturing sector’s decline has resulted in numerous layoffs and a decline in the industry’s share of the gross domestic product.  ,
The Indonesian Confederation of Workers Unions of the Archipelago has predicted that layoffs in the labor-intensive manufacturing sector could affect up to 100, 000 people since the start of 2024.  ,
The increase in the value-added tax (VAT ) rate, which became effective on April 1, 2022, has further strained the public’s purchasing power, according to Mr. Bhima.  ,
According to Mr. Bhima,” the VAT increase contributes to higher retail prices,” adding that the lack of social safety nets for the middle class, since the government’s main focus is primarily on providing social assistance to the poor, makes the situation worse.
Meanwhile, economist Yusuf Rendy Manilet from the Center of Reform on Economics ( Core ) stated that it is crucial for the government to begin funding those who fall under the middle class and aspir to be in the middle class.  ,
” Whether in the form of cash transfers or subsidies, ( these assistance ) can be given to the middle- and aspiring middle class ( population ), or else the downward trend in the middle class may continue”, Mr Yusuf said.  ,