Macroeconomic Celebration, Micro-Level Strain
Recently, if we look at developments on Threads, the atmosphere reflects a space where people share experiences and support one another. Since early September 2026, users have been sharing ways to adjust their budgets: from swapping café coffee for instant coffee brewed at home to replacing expensive personal-care products with more affordable local alternatives.
Yet official government reports present a contrasting picture. The national poverty rate fell to 8.07 per cent in March 2026, while economic growth was reported at 5.29 per cent in the second quarter.
These two realities need not be treated as contradictory or false. Instead, they reflect the same underlying condition: most Indonesian households have not suffered a total collapse, but are experiencing a depletion of their financial buffers. These buffers include savings and the reserves needed to cope with potential crises or emergencies.
A decline in living standards does not necessarily indicate a deep macroeconomic crisis. Household consumption remains on a positive trend overall, and Bank Indonesia’s Consumer Confidence Index was still in optimistic territory in September 2026, at 118.1.
Precarious work
The first source of concern is the stability of livelihoods. As of May 2026, informal-sector workers still accounted for the majority, numbering 87.88 million, or nearly 60 per cent of all employed people. Meanwhile, access to social protection in old age remains very limited for this group: only around 18.89 per cent of informal workers have access to pension insurance.
Without secure employment contracts, severance pay in the event of redundancy, or adequate health insurance, a sudden event such as the illness of a family breadwinner or the closure of a small business can immediately cripple a household’s finances.
Similar pressure is also being felt in the formal sector. Between January and August 2026, 53,490 workers filed claims under the Job Loss Insurance programme (JKP) following waves of redundancies.
The burden of food prices
The second factor further eroding household resilience is the rising cost of basic necessities. Annual inflation rose to 3.28 per cent in September 2026, slightly higher than the roughly 2.65 per cent recorded a year earlier. That figure may seem modest in macroeconomic statistics, but it weighs heavily on groups that spend most of their income on food. Food alone absorbs as much as 41.67 per cent of middle-class expenditure.
This situation has contributed to a shrinking middle class in Indonesia. The middle class accounted for 21.45 per cent of the population in 2019, but had fallen to 17.13 per cent, or around 47.85 million people, by 2024. Mandiri Institute data recorded a further decline, to about 46.7 million people, in 2025. According to Lopez-Calva and Ortiz-Juarez (2014), middle-class households can fall back into poverty when hit by a shock. By this measure, millions of Indonesian families are living in vulnerable circumstances, even though their monthly spending is officially above the poverty line.
When disaster strikes
The third factor, often overlooked in policy responses, is the threat of natural disasters. By the end of October 2026, the National Disaster Mitigation Agency (BNPB) had recorded 2,236 disasters across Indonesia, 99.19 per cent of them hydrometeorological events such as extreme weather, floods and landslides. By early September, these disasters had affected 111,533 homes.
For families without emergency savings, a natural disaster is not merely a physical calamity; it can trigger swift financial ruin, destroying household possessions, interrupting livelihoods and creating new debt. The World Bank report Unbreakable (2017), by Hallegatte and colleagues, estimates that natural disasters push around 26 million people worldwide into poverty each year. Financial crises and climate crises are often connected and compound the hardship faced by vulnerable communities.
Given the complexity of these problems, government policy must not be confined to helping people who have already fallen into poverty. Four practical measures are urgently needed. First, expand social protection for informal workers by subsidising their contributions to BPJS Ketenagakerjaan, Indonesia’s employment social security agency.
Second, optimise the JKP programme by focusing on retraining that matches labour-market needs, rather than merely providing temporary benefits. Third, update core socio-economic data regularly so that people at risk of poverty who have fallen through the social safety net can be identified accurately. Fourth, consistently stabilise the prices of staple foods, given that rice is the largest contributor to the poverty line in both urban and rural areas.
Disaster mitigation should also go beyond simply urging residents to stockpile supplies on their own. For households living on daily or monthly earnings, maintaining private emergency supplies is often difficult. Responsibility for preparedness should therefore be shared at community level through neighbourhood food reserves, participatory risk mapping and the use of village funds for infrastructure to protect residents.
In his book Building Resilience (2012), sociologist Daniel Aldrich shows that social capital and trust between residents play a significant role in speeding up recovery after disasters, compared with reliance on external aid. For families with sufficient means, preparing an emergency kit containing clean water, medicines, important documents and reserve cash is also an important precaution.
Ultimately, Indonesia’s middle class does not need passive sympathy, but recognition of its contribution as a hard-working driver of the economy, meeting its tax obligations and sustaining national consumption. What is needed is a state that provides a reliable support system, from protection against job loss and affordable food prices to stronger community solidarity in the face of shocks.
A nation’s progress is measured not only by economic growth on paper, but also by how secure its citizens feel about the future, without fearing that they may fall into poverty.