Weakening Purchasing Power and the Future of the Middle Class

Amidst various macroeconomic indicators that still show stability, there is one phenomenon that deserves serious attention: the weakening purchasing power of the public, particularly the middle-class group. Indonesia’s economic growth remains around 5 per cent—even reaching 5.61 per cent in the first quarter of 2026—inflation is relatively controlled, and various government stimulus programmes continue to be rolled out. However, behind these figures, many middle-class families feel that their incomes are no longer growing as fast as the rising cost of living.

This phenomenon is evident from the increasing number of households delaying the purchase of durable goods, reducing expenditure on recreation, and shifting consumption patterns towards cheaper products. In various major cities, restaurants, shopping centres, and even the property sector are beginning to feel a slowdown in demand. This condition shows that the issue of purchasing power is not merely a statistical issue, but a daily reality experienced by millions of people.

When the middle class experiences economic pressure, the impact is felt not only by those households but also by the economy as a whole. Data from the Indonesian Central Statistics Agency (BPS) shows that the middle class plays a very large role in the Indonesian economy. In 2024, the middle-class and ‘aspiring middle class’ groups covered approximately 66 per cent of the population and contributed more than 81 per cent to total national consumption. This means that the strength of Indonesian household consumption is highly dependent on the economic condition of this group. Therefore, when middle-class purchasing power weakens, it is no longer just an individual problem, but a strategic challenge for the future of the Indonesian economy.

In recent years, the number of people categorised as middle class has declined. Data processed from BPS shows the number of middle-class individuals fell from approximately 47.9 million in 2024 to 46.7 million in 2025. At the same time, the ‘aspiring middle class’ group—those positioned just below the middle class—has increased significantly. This change carries an important message: some members of the population who had previously successfully entered the middle class are unable to maintain their economic status. They are experiencing pressures that cause their economic position to drop into more vulnerable groups.

Looking further, this trend has actually been occurring for several years, particularly following the Covid-19 pandemic. Several studies indicate that Indonesia has lost millions of middle-class residents over the last decade. This shrinkage is a signal that the economic mobility that previously functioned well is now facing serious obstacles. This phenomenon presents a paradox. On one hand, Indonesia has succeeded in reducing poverty rates and maintaining economic growth. Yet, in development theory, a strong middle class is a primary characteristic of a country moving towards developed nation status. The middle class typically serves as the engine of consumption, a source of tax revenue, a driver of educational investment, and a foundation for social and political stability. When the middle class weakens, the transformation process towards becoming a developed nation potentially slows down.

Several factors explain why middle-class purchasing power is currently under pressure. First, income growth is not as fast as the rising cost of living. Nominally, the income of some workers has indeed increased. However, these increases are often insufficient to offset the ever-increasing cost of living. The costs of education, healthcare, transport, housing, and even digital needs rise year after year. As a result, the fiscal space for households is narrowing. Most income is spent on routine needs, reducing the ability to save and invest. Second, changes in the labour market structure. One of Indonesia’s greatest challenges today is the limited creation of formal jobs with adequate wages. Many new jobs appear in the informal sector or digital platform-based work, which offers high flexibility but does not always provide stable income guarantees. For the middle class, income stability is vital. When job certainty decreases, households tend to withhold consumption and increase savings as an anticipatory measure. Third, the increasing burden of household debt. In recent years, access to various financing facilities has become easier.