Fuel Price Increase Will Repress Vulnerable Middle Class Spending, Manufacturing Industry Demand Will Be Hit

Illustration (Photo: Doc. Antara)

JAKARTA - The price of subsidized fuel oil (BBM) is rumored to increase this week. However, the government was reminded not to implement the plan.

This is because the increase in fuel prices will suppress the spending of the vulnerable middle class. As a result, the demand for the manufacturing industry will also be hit.

Director of the Center of Economics and Law Studies (Celios) Bhima Yudhistira said that the government should pay close attention to the increase in subsidized fuel prices, especially Pertalite.

"Please the government pay close attention. Are the conditions of the poor currently ready to face the increase in fuel prices, after volatile food inflation has almost touched 11 percent annually as of July 2022?," he said when contacted by VOI, Monday. , August 29.

Not only that, said Bhima, the vulnerable middle class will also be affected.

If previously they were still able to buy Pertamax fuel, said Bhima, the increase in Pertamax prices made them switch to Pertalite.

"If the price of Pertalite also goes up, the middle class will sacrifice other spending. Those who were able to shop for clothes, want to buy houses through mortgages, until they set aside money to start new businesses are finally eroded to buy gasoline. What will be the impact? Demand for the manufacturing industry can be hit," he said.

In fact, said Bhima, labor absorption can also be disrupted.

"And the government's economic recovery targets could be missed," he said.

Moreover, said Bhima, if inflation penetrates too high a rate and labor absorption is disrupted, Indonesia could catch up with other countries entering the stagflation phase.

"The impact could be 3-5 years of disrupted recovery due to a sharp decline in purchasing power," he said.