Economists predict that Indonesia's economy will stabilize in 2023, with a projected growth rate of around 5%, which is the average rate before the Covid-19 pandemic. One factor that could contribute to this growth is increased consumer spending during Ramadan, with a projected increase of 4.8 to 5% in Q2 2023. However, the high inflation and fuel prices in September 2022 may impact consumer spending patterns in 2023. Nevertheless, the faster-than-usual presidential and parliamentary elections are expected to have a positive impact on the economy.
DBS Bank surveyed 722 respondents for two weeks in November 2022, and found that inflation is an important factor for consumers, with almost 60% expressing concerns about it. The surveyed consumers reported a much higher inflation rate than the data provided by the Statistics Indonesia (BPS). Almost 90% of respondents said the inflation trend would continue until 2023. Two-thirds of respondents changed their spending habits to deal with high inflation and prepare for the month of Ramadan. The survey also found that 70% of businesses tend to reduce expenses and look for cheaper materials due to the impact of the COVID-19 pandemic.
Due to high inflation, most respondents choose cheaper goods for their basic needs and reduce their secondary needs. Consumer consumption remains stable despite changes in their choice of goods. The upper class does not switch to cheaper goods but reduces the frequency of their shopping. More than two-thirds of respondents have changed their shopping habits in the next six months, especially for the middle class and lower. Respondents prioritize transportation, fuel, and household needs. The lower class focuses on basic needs and housing, while the upper class focuses on personal care and beauty, as well as saving for recreation. Maynard predicts a seasonal strengthening in consumer growth due to increased shopping during Ramadan and travel in the current quarter.
Despite the government claiming that inflation in Indonesia is still under control, the public feels a higher inflation rate than what the government reports. The impact of inflation differs between the middle-lower class and upper class. The middle-lower class is more affected due to the rise in the price of basic necessities, while the upper class can still avoid this impact.
The inflation trend is expected to continue for the next six months, with an increase in consumer spending due to Tunjangan Hari Raya and the government's relaxed policies during the Mudik period.
Meanwhile, the growth of sales during the pandemic is no longer limited, and people are more focused on inflation due to rising fuel and basic necessities prices. Overall, the Indonesian banking sector is healthy and more isolated than Western banking sectors, as problems occurring in Europe or the United States do not happen in Indonesia.
