Indonesia is facing an intriguing yet worrying economic paradox. On\none hand, national economic growth remains around 5 per cent, and the\ngovernment continues to promote strategic national projects, downstream\nindustrialisation, and optimism towards the Golden Indonesia 2045\nvision. On the other hand, the group that has long been the backbone of\ndomestic consumption\u2014the middle class\u2014is under increasingly heavy\npressure.<\/p>\n
They are neither the poor who receive social assistance, nor the\nwealthy who possess large asset and investment cushions. The middle\nclass sits in between, serving as the consumption engine and the largest\ntaxpayers, yet they are the most vulnerable to economic decline during\nshocks.<\/p>\n
In recent years, various indicators show that Indonesia\u2019s middle\nclass is facing serious strain. Stagnant real incomes, rising living\ncosts, expensive education and healthcare, job uncertainty due to\ndigitalisation, and increasing household debt burdens are combining to\nerode this group\u2019s resilience.<\/p>\n
The question then arises: can the sharia economy be part of the\nsolution? Can this system, founded on principles of justice,\nsustainability, and equitable distribution, become a saviour for\nIndonesia\u2019s pressured middle class?<\/p>\n
When discussing the middle class, we are essentially talking about\nthe foundation of Indonesia\u2019s economy. Data from the Central Statistics\nAgency (BPS) shows that in 2024, the middle class and aspiring middle\nclass accounted for 66.35 per cent of the total population. More\nimportantly, this group contributed around 81.49 per cent of total\nnational household consumption. This means that the wheels of\nIndonesia\u2019s economy are largely driven by their spending. Therefore,\nwhen the middle class is under pressure, the impact is felt not only by\nindividual households but by the economy as a whole.<\/p>\n
The problem is that the current trend shows a shrinking middle class.\nThe latest data indicates the number of middle-class Indonesians fell\nfrom 47.9 million in 2024 to around 46.7 million in 2025. Conversely,\nthe \u2018aspiring middle class\u2019 group has increased to around 142 million.\nAt a glance, these figures may not seem alarming. However, upon closer\nexamination, this phenomenon shows that some people previously in the\nmiddle-class category have experienced a decline in economic power and\nshifted to a more vulnerable group. A Reuters report even noted that the\nproportion of Indonesia\u2019s middle class fell from around 21.5 per cent of\nthe population in 2019 to approximately 17.1 per cent in 2024. This\ntrend poses a serious threat because household consumption has long been\nthe largest contributor to Indonesia\u2019s Gross Domestic Product (GDP). If\nconsumption weakens, economic growth will lose its driving force.<\/p>\n
Several key factors explain this condition. First, the growth of\nquality employment is slower than the demand for labour. Indonesia has\nsuccessfully created millions of jobs, but the majority of new jobs are\nin the informal sector or have low productivity. Many university\ngraduates end up working in sectors mismatched with their competencies.\nAs a result, higher education levels are not always followed by higher\nincomes. This phenomenon creates what is often called an \u2018educated\nmiddle-class trap\u2019, where a person holds a degree but their income is\ninsufficient to maintain a middle-class lifestyle.<\/p>\n
Second, living costs are rising faster than income growth. Housing\nprices continue to climb, education costs are increasingly expensive,\nand health spending is rising. Meanwhile, salary increases often fail to\nkeep pace with these living costs. This situation narrows the fiscal\nspace for middle-class households. Where they once had room to save and\ninvest, now most of their income is spent on meeting routine needs.<\/p>\n
Third, the phenomenon of \u2018downtrading\u2019. Various surveys show that the\nmiddle class is changing its consumption behaviour. They still visit\nshopping centres but are more selective in choosing goods. They seek\ncheaper alternatives, buy in smaller quantities, and are more\nprice-sensitive. This phenomenon is a classic signal of weakening\npurchasing power.<\/p>\n
Fourth, increasing financial vulnerability. Many middle-class\nhouseholds live from pay cheque to pay cheque. When faced with layoffs,\nillness, or other urgent needs, they lack adequate financial reserves.\nAs a result, some turn to consumer loans, including online loans, which\nactually worsen their financial condition.<\/p>\n
The pressure on the middle class also points to deeper structural\nissues. Over the past two decades, Indonesia\u2019s economy has grown fairly\nsteadily. However, this growth has not fully resulted in an economic\ntransformation capable of creating a large number of high-quality formal\njobs. Many economists argue that premature deindustrialisation is a\nprimary cause. The manufacturing sector\u2019s contribution to GDP continues\nto decline, while growth is increasingly driven by commodities and\nlow-productivity services. Historically, a strong middle class has\nalways emerged from industrialisation that creates formal employment\nwith decent wages. Without the creation of productive jobs on a massive\nscale, the middle class will continue to be squeezed.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/indonesias-middle-class-under-pressure-could-sharia-economics-be-the-saviour-1781355062", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }