Middle-Upper Class Consumption is the Key to Economic Growth in 2021 Page all

JAKARTA, KOMPAS.com – Centre of Reform on Economics ( Core) assessed that Indonesia’s economic recovery in 2021 will depend on the level consumption class society medium upward. Because, group this society has the purchasing power that is maintained in the middle of a pandemic.

Meanwhile, Core projects that Indonesia’s economic growth in 2021 will be in the range of 3.0 percent to 6.0 percent.

“The economic recovery in 2021 will be determined by the restoration of consumer confidence in the upper middle class,” Core wrote in his official statement, quoted on Sunday (22/11/2020).

This level of confidence is influenced by several factors, especially the decrease in the transmission and fatality rate of the Covid-19 pandemic, the level of community adaptation to the pandemic, and the vaccination process.

Also read: Sri Mulyani: No Economic Recovery Until All Countries Get Vaccines

With this increase in confidence, it will encourage an increase in spending on goods and services that is on hold during 2020. Especially on durable goods (durable goods) and consumption leisure.

This year indeed public consumption middle to top restrained. Core explained that private consumption, which is the main motor of Indonesia’s economy, is experiencing the deepest pressure due to the increasing pandemic cases.

In the second and third quarters of 2020, private consumption contracted by 5.5 percent and 4 percent, respectively.

The deepest decline occurred in related consumption leisure, namely the transportation and warehousing sector, as well as the accommodation and food and beverage provision sector.

Cumulatively in the first three quarters of this year, the two sectors contracted by 15.6 percent and 10.7 percent respectively compared to the same period last year.

The main cause of the decline in consumption of all income groups is government policies that impose social restrictions. In addition, community behavior, especially the upper middle class, is also encouraged, which reduces economic activity to prevent Covid-19 transmission.

” Group Upper middle income, which contributes 82 percent to total public consumption, tends to hold back their spending, “explained Core.

One indication of the middle class’s delayed purchase behavior can be seen from the increasing growth of third party funds (DPK) in banks.

Meanwhile, lower income groups experienced a decrease in purchasing power in line with the decline or even loss of their income during the pandemic. This is reflected in 2.56 million people who lost their jobs due to Covid-19 during February-August 2020.

Although indeed, the pressure on consumption of the lower income groups is somewhat helped by the government’s social assistance (bansos) through the national economic recovery program (PEN), both in the form of transfers of goods, money, and provision of subsidies.

“Therefore, the confidence of the upper middle class is the key to consumption growth in 2021,” said Core.

Also read: Minister Teten: UMKM Digital Productive Keys to Indonesia’s Economic Recovery

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