INDEF: Consumer Purchasing Power Below 5%, Growth Also Stalled

The Institute for Development of Economics and Finance (INDEF) reports that for the last eight quarters, Indonesia's household consumption has been below 5%.

The chart shows that in Q4 2023, Indonesia's gross domestic product (GDP) growth based on household consumption expenditure was only 4.47% compared to Q4 2022 (year-on-year/yoy).

Subsequently, consumption figures consistently remained at the 4% level until Q3 2025, reaching 4.89% (yoy).

INDEF analyzes that this weak public purchasing power is also evident in other data.

Firstly, the growth of sub-sectors related to leisure has not yet shown improvement, such as restaurants and hotels, as well as transportation and communication.

"Despite this, these sub-sectors were expected to increase following the provision of fiscal stimulus for the transportation sector and wage subsidies in June-July 2025," said Eisha Maghfiruha Rachbini, INDEF Program Director, in a report received by *Databoks* on Thursday (21/11/2025).

Secondly, the Consumer Confidence Index (CCI) surveyed by Bank Indonesia (BI). INDEF states that its trend often experiences a decline.

Thirdly, the net realization of tax revenue from VAT & Luxury Goods Sales Tax (PPnBM) until September 2025 shows a slowdown of 13.2% compared to the 2024 period.

Eisha believes that this decline in purchasing power has a domino effect, hindering Indonesia's economic growth.

Notably, the average economic growth achieved throughout Q1-Q3 2025 was 5.01%.

"This means that achieving the 5.2% growth target in 2025 requires more intensive efforts," said Eisha.

Based on its data and studies, INDEF projects Indonesia's economic growth in 2026 to be 5%. INDEF's considerations are as follows:

• Increased global uncertainty (geopolitics, China's slowdown, trade fragmentation) thus suppressing exports, capital flows, and exchange rates.
• Domestic consumption recovery remains fragile due to food-energy price pressures and purchasing power that has not fully recovered.
• Investment is not yet expansive and less productive, still relying on capital-intensive projects with small multiplier effects.
• The labor market is fragile (dominated by informal sector, skill mismatch), thus limiting household income growth.