Middle-Class Gen Z and the Consumption Crunch: How Indonesia’s Economic Slowdown Affects Us All
“When your daily coffee costs more but your paycheck stays the same, you know something’s off.”
Ever felt like your money doesn’t stretch as far as it used to? That the Rp50,000 in your wallet seems to vanish after just a quick trip to the market? You’re not alone. Indonesia’s economy is going through a rough patch, and it’s not just numbers on a news ticker — it’s affecting our daily lives, our future, and the local businesses we love.
“Economics might sound dry, but when it starts hitting your pocket and your favorite hangouts, it’s time to pay attention.”
The Current Vibe of Indonesia’s Economy
Let’s break it down. Before COVID-19 hit, Indonesia was cruising with a steady GDP growth of around 5.1% in 2019. Life wasn’t perfect, but the economy was on a stable path. Then came the pandemic, and in 2020, the economy shrank by about 2.1% — the first contraction in over two decades. Ouch.
Fast forward to now, and you’d think things are back on track with GDP growth returning to about 5% in 2022. But here’s the kicker: despite the growth on paper, many of us aren’t feeling the recovery. Inflation has surged to around 4.9% in 2022, the highest in years. That means prices are climbing faster than our incomes, eroding our purchasing power.
“Think of inflation as a sneaky pickpocket — it slowly takes away your ability to buy the same stuff with the same cash.”
How Inflation Eats Into Our Cash
Let’s get real with some numbers. Suppose you had Rp1,000,000 in savings in 2019. With an average inflation rate of about 3% back then, your money’s purchasing power would decrease slightly each year. But with the current inflation rate hitting nearly 5%, that same million rupiahs now buys you significantly less — think of losing Rp50,000 in value over a year without even spending it.
For daily expenses, this means your Rp20,000 lunch is now Rp25,000. Your monthly groceries that used to cost Rp500,000 might now set you back Rp600,000. It’s like running on a treadmill that’s gradually speeding up — you have to work harder just to stay in the same place.
“MSMEs are the heartbeat of our economy, but right now, they’re running a marathon with a backpack full of bricks.”
MSMEs: The Unsung Heroes Facing Tough Times
Micro, Small, and Medium Enterprises (MSMEs) aren’t just buzzwords — they’re the warungs, the local fashion brands, the tech startups hustling every day. They contribute over 60% to Indonesia’s GDP and employ nearly 97% of the workforce. But despite the economy showing signs of recovery on paper, MSMEs are struggling more than ever.
Compared to pre-COVID times, many MSMEs report that their revenues are still down by 30–50%. During the pandemic, they faced lockdowns and supply chain disruptions. Post-pandemic, they’re hit with rising costs and a cautious consumer base tightening their belts due to inflation.
“5% growth sounds good until you realize it’s like running in place while the world moves ahead.”
Why the 5% Growth Isn’t Cutting It
Sure, a 5% GDP growth rate seems solid, but context is everything. Pre-COVID, that growth was building on a stable economy. Now, it’s about climbing out of a hole. Think of it this way: if you lose 10% of your income one year and then gain 5% the next, you’re still not back to where you started.
Moreover, population growth hasn’t slowed down. More people are entering the workforce, and the economy needs to grow faster to provide enough jobs and opportunities. Unemployment spiked to 7.1% during the pandemic and has only slightly improved since. So, while the GDP numbers look promising, the benefits aren’t trickling down to everyday folks or small businesses.
“Comparing now to pre-COVID times is like comparing a photocopy to the original — it looks similar but lacks the depth and quality.”
Before, During, and After COVID-19: A Comparison
- Before COVID (2019): Steady economic growth at 5.1%, inflation manageable at around 3%, unemployment at a low 5.2%. Consumer confidence was high, and people were spending.
- During COVID (2020–2021): GDP contracted by 2.1% in 2020. Unemployment jumped to 7.1%. MSMEs faced closures, with an estimated 30% shutting down temporarily or permanently.
- After COVID (2022 onwards): GDP growth returned to 5%, but inflation surged to nearly 5%. Unemployment slightly improved but remained higher than pre-pandemic levels at 6.5%. Consumer spending is cautious, and MSMEs are struggling to regain footing.
Despite the economic indicators suggesting recovery, the ground reality tells a different story. We’re not just back to square one; we’re trying to climb back up a ladder that’s missing a few rungs.
“Middle-class families are juggling flaming torches, trying not to get burned by rising costs and stagnant incomes.”
The Middle-Class Squeeze
For many middle-class Indonesians, the dream has always been upward mobility — better jobs, owning a home, and providing quality education for their kids. But with the current economic climate, that dream is getting harder to reach.
Incomes have largely stagnated. According to recent data, wage growth has been minimal, with average salaries increasing by only about 1–2% annually. Meanwhile, essential costs like food, housing, and education have risen significantly — some by as much as 10% in urban areas.
This disparity forces middle-class families to make tough choices: cutting back on non-essentials, dipping into savings, or taking on debt. The risk here is a potential decline back into lower-income brackets, undoing years of progress in poverty reduction.
“When the foundation shakes, it’s not just about rebuilding — it’s about reinforcing for the future.”
Long-Term Implications
If this trend continues, we could face a host of long-term issues:
- Reduced Consumer Spending: As more people tighten their belts, businesses see lower revenues, leading to layoffs and further economic slowdown.
- Increased Debt Levels: Both consumers and businesses may take on more debt to stay afloat, which can lead to financial instability.
- Social Unrest: Economic hardship can lead to dissatisfaction and unrest, as seen in various countries facing economic crises.
- Brain Drain: Talented individuals might seek opportunities abroad, leading to a loss of skilled labor.
“We might be in the same storm, but we’re not all in the same boat. Time to grab the oars and start rowing together.”
How Can We Navigate Through This?
- Support Local Businesses: Choose to buy from MSMEs. Your purchase could be the difference between a business surviving or closing down.
- Stay Informed: Knowledge is power. Understanding economic trends can help you make better financial decisions.
- Budget Wisely: With inflation high, it’s crucial to manage expenses and prioritize needs over wants.
- Invest in Skills: Upskilling can make you more competitive in the job market, providing better income opportunities.
- Advocate for Change: Use your voice to support policies that promote economic stability and growth, such as subsidies for MSMEs or measures to control inflation.
“Our economy isn’t a spectator sport — it’s a team game, and every player counts.”
Conclusion
The signs are clear: while numbers might suggest we’re on the mend, the reality is more complex. Inflation is nibbling away at our purchasing power, and MSMEs — the backbone of our economy — are struggling to stay afloat. As Gen Z and members of the middle class, we’re uniquely positioned to influence the tide.
By making conscious choices, supporting local businesses, and staying engaged with economic developments, we can help steer Indonesia toward a more stable and prosperous future. It’s not just about weathering the storm but navigating through it to clearer skies.
“The future isn’t set in stone — it’s written by those who show up. Let’s be the authors of a better tomorrow.”
Final Thoughts
Economic challenges are daunting, but they’re not insurmountable. History has shown that collective effort and informed action can turn the tide. Let’s be proactive — not just for ourselves, but for the communities and the country we cherish.
Do you have thoughts or experiences to share? Drop them in the comments. Let’s keep the conversation going.
Footnotes
- World Bank, Indonesia Economic Prospects, 2019.
- Statistics Indonesia (BPS), National GDP Data, 2020.
- Bank Indonesia, Economic Growth Reports, 2022.
- Bank Indonesia, Inflation Rate Data, 2022.
- Bank Indonesia, Historical Inflation Rates, 2019.
- Ministry of Cooperatives and SMEs, MSME Statistics, 2021.
- Indonesian MSME Association Survey, 2022.
- BPS, Unemployment Statistics, 2021.
- BPS, Economic Indicators, 2019.
- BPS, GDP Growth Data, 2020.
- BPS, Unemployment Rate, 2020.
- LIPI, Impact of COVID-19 on MSMEs, 2020.
- Bank Indonesia, Inflation Reports, 2022.
- BPS, Unemployment Data, 2022.
- Ministry of Manpower, Wage Growth Statistics, 2021.
- BPS, Cost of Living Index, Urban Areas, 2022.
