DIGIVESTASI - In early September 2024, towards the end of President Joko Widodo's (Jokowi) term, Indonesia was faced with two pieces of bad news at once, namely a decline in the Consumer Price Index (CPI) and the Manufacturing Purchasing Managers' Index (PMI). The Central Bureau of Statistics (BPS) reported on Monday (2/9/2024) that the CPI for August experienced deflation of 0.03% on a monthly basis (month-to-month/mtm), mainly due to a decline in food, beverage, and tobacco prices which contributed 0.15%. Even so, on an annual basis (year-on-year/yoy), inflation was recorded at 2.12%, slightly lower than previously estimated.

According to BPS Deputy for Distribution and Services, Pudji Ismartini, the decline in food commodity prices was the main factor in this deflation, with the food, beverage, and tobacco category experiencing deflation of 0.52%. The abundance of food supplies, especially after the easing of the El Niño impact, was the main cause of the price decline.

Deflation, which occurred for the fourth consecutive month, is a signal of weakening purchasing power. The situation is reminiscent of the eight months of deflation in 1999, which was a result of the 1997/1998 economic crisis. Hosianna Situmorang, an economist at Bank Danamon, believes that the current deflation was triggered by a decline in food prices due to the normalization of food production.

Meanwhile, Indonesia's Manufacturing PMI contracted for the second consecutive month, with August's figure at 48.9, down from 49.3 in the previous month. This signaled a decline in output and new orders in the manufacturing sector, worsening the situation amid weak purchasing power.

Fithra Faisal, Senior Economist at Samuel Sekuritas Indonesia, projects that the weak performance of the manufacturing industry will continue until the end of the third quarter of 2024. However, until now President Jokowi has not given an official statement regarding the economic conditions that are increasingly showing signs of weakening.

On the other hand, the number of middle class in Indonesia has decreased since the Covid-19 Pandemic crisis. Based on BPS data, the number of middle class in 2019 reached 57.33 million people or 21.45% of the total population, but in 2024 only 47.85 million people or 17.13% will remain. This means that as many as 9.48 million people from the middle class have experienced a decline in status.

In contrast, the vulnerable middle class or *aspiring middle class* actually increased from 128.85 million people (48.20%) in 2019 to 137.50 million people (49.22%) in 2024. In addition, the number of the vulnerable poor also swelled, from 54.97 million people (20.56%) in 2019 to 67.69 million people (24.23%) in 2024. This shows how much the middle class has fallen into the vulnerable group.

Over the past decade, Indonesia's middle class has also become increasingly vulnerable to falling into poverty. The expenditure of this group tends to be close to the lower limit of the grouping, indicating that it is increasingly difficult for them to rise to the upper class and risk falling into the vulnerable middle group or even the vulnerable poor group.

Find more news and articles on Google News