Household Consumption, The 'Old Song' Which Is The Determining Indicator For Indonesia To Get Rid Of Economic Contraction

Illustrated. (Irfan Meidianto / VOI)

JAKARTA - Indonesia's economic growth in the first quarter of 2021 is still in the negative zone, namely 0.74 percent. This shows that Indonesia is still not out of economic recession. Executive Director of Indef Tauhid Ahmad said one of the determining factors for Indonesia to get out of this situation was household consumption.

"Household consumption is a determining factor why we are still contracting and this is one of our big question marks, why is household consumption still contracting minus 2.23 percent," he said in a virtual discussion, quoted on Thursday, May 6.

According to Tauhid, based on its components, the contraction occurred in the food and beverage sector outside of restaurants. His condition was even worse than in the fourth quarter of last year. Meanwhile, for clothing, footwear and others, it is actually much better than the previous quarter.

"This means that there has been a reduction in household consumption for food and beverage needs. If we look at the distribution of food and beverages from household consumption, 50 percent of the time itself, so it means that it is above 50 percent. When there is a reduction compared to the fourth quarter of 2020, we have problems in household consumption, "he said.

In fact, said Tauhid, in the first quarter of 2020 government assistance through the social protection program until April 2021 was almost 31 percent. Even the budget issued by the government reaches Rp.47 trillion. This program received the largest budget compared to other economic recovery programs.

"So if the government has been convincing us that PEN is running effectively, but if we look at the fact that household consumption is still contracting and food and drinks are getting worse. So it is questionable that PEN for social protection is not good enough to encourage consumption, even for basic food needs. and beverages other than restaurants in the first quarter of 2021, "he explained.

Tauhid does not deny that there are improvements. However, he stressed that food and drink should not be negative. However, the current condition is even worse than in the fourth quarter of 2020.

Causes of low household consumption

According to Tauhid, the cause of low household consumption is low purchasing power. In fact, it is much lower than before the COVID-19 pandemic. Where before COVID-19 in March 2020 it still reached 2.6 even almost 3 inflation.

"This is one of the indicators measuring purchasing power. But now it is even worse until the first quarter. The average is below 1.5 percent. What does that mean? Demand for goods and services is depressed due to low purchasing power so that people's consumption is low," he said.

Even though there was an improvement in March, said Tauhid, in general consumers are still pessimistic and this is not normal, seen from the consumer confidence index. According to Tauhid, it is natural that consumption is still low, because consumers do not believe in shopping.

"This means that several incentives need to be questioned, especially for the middle to upper class groups because they do not encourage higher consumption. Especially since several PPnBM exemption policies for three months at the beginning of last year," he said.