Middle-Class Purchasing Power Threatened Amid Global Pressures

Jakarta — The Institute for Development of Economics and Finance has identified the lower-middle-class population as the most vulnerable group affected by mounting global economic pressures. Any weakening in this segment’s purchasing power would simultaneously dampen household consumption, which remains the primary driver of national economic growth.

M Rizal Taufikurahman, head of Indef’s Macroeconomics and Finance Centre, contends that government intervention is necessary to shield purchasing power from direct external shocks.

“Policy measures must necessarily intervene in purchasing power and household consumption,” he stated during an online discussion held in Jakarta on Saturday.

He emphasised that preserving consumer purchasing power must become the primary policy priority amid escalating global economic pressures triggered by geopolitical instability and soaring energy costs. Stabilising public purchasing power is critical because Indonesia’s economic structure remains heavily dependent on household consumption.

“Since our economic structure depends fundamentally on consumption, which accounts for 53 per cent, we must protect and preserve it at all costs,” he said.

He explained that current global economic dynamics are shaped by the United States facing fiscal and trade pressures. The American fiscal deficit has reached approximately 6.5 per cent, whilst total national debt has exceeded around 127 trillion US dollars.

Additionally, substantial trade deficits are driving various expansionary economic policies from the United States to maintain economic stability.

“This has prompted policies like trade barriers and restrictive measures, as well as expansionary policies currently in place, all designed to protect American economic stability,” Rizal stated.

According to him, these policies influence the global economy and impact other nations, including Indonesia. Without proper anticipation, these conditions could exert serious pressure on domestic economic stability.

One significant risk requiring careful monitoring is the potential surge in global crude oil prices due to geopolitical escalation, as Brent crude has already approached and could potentially exceed 100 US dollars per barrel.

Should this trend persist, he warned, energy inflation pressures would intensify and potentially widen fiscal deficits for energy-importing nations like Indonesia. Furthermore, currency volatility and global financial market instability could increase, further straining domestic economic conditions.