Excluded from Social Aid, Middle Class Squeezed by Rising Energy Prices

The increase in energy prices, particularly non-subsidised fuel oil (BBM), is beginning to exert significant pressure on the domestic economic structure. Micro, Small, and Medium Enterprises (MSMEs) and the middle class have been identified as the segments most vulnerable to the shock to living and operational costs. M. Rizal Taufikurahman, Head of the Macroeconomics and Finance Centre at the Institute for Development of Economics and Finance (Indef), stressed that the government needs to immediately balance its energy price policy with measures that sustainably protect people’s purchasing power. According to Rizal, the middle class and those on the verge of being middle class (aspiring middle class) are often in a difficult position. They are generally not included in the social assistance (bansos) recipient scheme, yet are directly exposed to rising energy, transportation, and living costs. “This group particularly includes formal workers, MSME players, and fixed-income households. In fact, the middle class is the backbone of domestic consumption that supports national economic growth,” Rizal said. Indef suggests that the government should not rely solely on short-term, temporary cash assistance. There are several strategic steps considered more effective in curbing the rise in the cost of living while maintaining the momentum of economic growth. In addition to providing stimulus, Rizal emphasised the importance of improving the governance of energy subsidies to ensure they are better targeted. Strict oversight is required so that the state budget is truly allocated to protect productive yet vulnerable groups. “By maintaining the purchasing power of the middle class and improving subsidy governance, the government is not only mitigating the impact of non-subsidised fuel price hikes, but also maintaining fiscal stability and the momentum of national economic growth,” he concluded.