This is how scary it is if purchasing power is further eroded

Jakarta –

Indonesia experienced deflation for five consecutive months. Trade Minister Zulkifli Hasan or Zulhas admitted that a decline in purchasing power was the reason for Indonesia to suffer deflation for months.

This continued inflation occurred from May-September 2024. The Bureau of Statistics (BPS) noted in May 2024 that deflation was 0.03% per month (mtm). Then in June 2024 it will go deeper by 0.08%. In July 2024 it will continue to worsen, reaching 0.18%. In August 2024, the figure returned to the level of 0.03%, worsening again in September 2024 with 0.12%.

“Well, this is one thing, the supply is due to the rainy season, summer, production is enough. Secondly, it is admitted that purchasing power has dropped a little,” he said when met next to the Indonesian Trade Expo, ICE BSD, Tangerang, Wednesday (9/10/2024) ago.

So what will be the effect when purchasing power decreases?

The Executive Director of the Center for Economic and Legal Studies (CELIOS) Bhima Yudhistira said that if this situation is not alleviated immediately, the effect could be an economic recession that could trigger a wave of large discounts.

“Some business actors understand deflation as a concern that future demand, especially for non-basic needs, will weaken. So they implement efficiency in different lines ,” said Bhima to him detikcomannounced Friday (11/10/2024).

In addition, he observed that this phenomenon also caused economic growth to be below 5% and the sale of debt securities to decrease. This is because investors are worried about the country’s domestic situation.

He did not stop there, Bhima said that there would be a change in the value of the project or even the cancellation of the project in the next government because money would be sent to help people’s purchasing power. In addition, the weakening of the rupiah exchange rate will affect construction costs and may lead to cost overruns if they are forced to continue. There are programs that will be affected, such as the construction of the Indonesian Capital (IKN), the Jakarta Surabaya high-speed train project, dams, ports, and the completion of toll roads.

“It is better to contact experts to find solutions or mitigation. Business actors are also invited to prepare for the worst-case scenario so they can hedge better,” he explained.

He also proposed several government solutions, such as canceling mega infrastructure projects and switching to social protection programs for the vulnerable middle class, strengthening the business sector by attracting higher quality investment. height In addition, promoting sustainable agriculture and fisheries sectors with increased APBN support, for example for fertilizer subsidies, reducing the VAT rate from 11% to 9%, as well as canceling all a policy that increases the burden on the middle class starting from a mandatory pension. money, Tapera, compulsory insurance motor vehicle, up to 12% VAT.

Likewise, the Executive Director of the Center for Economic Reform (CORE) Mohammad Faisal said that the decline in purchasing power would have an impact on slower economic growth and widening of the gap in society, especially between the middle class and upper class. Although the middle class is the engine of economic growth.

“In terms of economic growth, we estimate that it will grow below 5%. So, about 4.95%. This cannot be separated from the growth in domestic consumption. Because household consumption contributes more than half of the economy. slower,” he said detikcom.

If this is allowed to continue, it will certainly affect the new government. For this reason, he advised the President-Elect Prabowo Subianto to pay attention to the phenomenon of declining purchasing power.

“The new government must pay serious attention to this problem. Since it is a waste to pursue an economic growth of 8%, there is a fear that it will not be possible to even exceed 5% if there is such a thing,” he said.

Check it out: Jokowi at the last Cabinet Meeting: Maintain the stability of economic power purchases

[Gambas:Video 20detik]

(rrd/rd)