Household Consumption Slows Down Due To Rising Food Prices

Food prices (photo: dock. Antara)

JAKARTA - The Central Statistics Agency (BPS) noted that Indonesia's gross domestic product (GDP) grew 5.05 percent cumulatively or cumulatively to cumulatively (ctc) throughout 2023.

Meanwhile, household consumption is still the driving force for economic growth in 2023. However, household consumption has slowed in 2023 to 4.82 percent when compared to 2022 of 4.94 percent.

Head of Bank Permata economist Josua Pardede emphasized that in maintaining the momentum of growth in household consumption amidst the government's global economic slowdown, it is necessary to encourage food price stability and basic necessities.

"The government needs to encourage the stability of food prices and other basic necessities such as clothing and boards so that they can manage people's purchasing power as a whole," he explained to VOI, Tuesday, February 6, 2024.

Josua suspects that this decline is the impact of El Nino, which encourages an increase in food prices, thereby reducing food spending. So that it has a sizeable impact on household consumption in total because this consumption has the greatest weight on household consumption.

On the other hand, Josua saw that clothing and footwear consumption was relatively stable in the fourth quarter of 2023. In addition, household appliance consumption grew higher.

According to Josua, another reason why there is a slowdown in household consumption is because consumption is related to mobility, especially transportation and communication spending, which is the consumption group with the second highest share in household consumption, experiencing normalization from high base in 2022.

In addition, based on community social groups, the central government continues to strive to mitigate the impact of El Nino with the distribution of social assistance aimed at low-income people.

Middle-class consumer groups that fall into the category of vulnerable poor people or fall into the 5th and 6th decelerations tend to hold back long-lasting goods spending.

Josua said that in order to maintain the momentum of growth in household consumption, which is expected to support the economy in the midst of the government's global economic slowdown, it is necessary to encourage the stability of food prices and prices for basic needs.

He gave an example, such as clothing and boards so that they can manage people's purchasing power as a whole. In addition, the government needs to encourage the level of confidence of middle-income consumers to keep shopping, for example by encouraging VAT DTP incentives.