JAKARTA - In recent months, the Indonesian economy has faced severe challenges, which have also sparked concern among business people, investors, and the general public. The Indeks Harga Saham Gabungan (IHSG)continued to plummet, and the Stock Exchange even had to take the step of trading halt (stock exchange policy to stop trading stocks temporarily) after it fell more than 5 percent.
Five years ago, the main cause of the move was the pandemic. But now there are many contributing factors. In addition to domestic economic conditions, the declining purchasing power of the people, the weakening rupiah exchange rate against the US dollar, and the decline in tax revenue are some indicators that show how complex the economic problems facing this country are.
But also external factors such as the unimproved law enforcement, legal certainty that undermines investor confidence to invest in Indonesia. So they pulled their funds out. Also due to world geopolitical factors, and the impact of the trade war between America and China.
The IHSG, which is a barometer of the health of the Indonesian capital market, has recorded a significant decline in recent weeks. At the close of trading last week, the JCI fell by 5% in a month, breaking the lowest level in the past year. The decline in the JCI triggered investor panic and they pulled their funds out. Analysts cited global uncertainties, such as interest rate hikes by the US central bank (the Fed) and geopolitical tensions, as the main factors affecting investor sentiment. In addition, fears of a domestic economic slowdown also led foreign investors to withdraw their funds from the Indonesian stock market.
On the consumption side, people's purchasing power continues to decline. People's purchasing power is declining. Information from a research institute from a supermarket that found symptoms, there is a decrease in the purchase of formula milk for babies. Whereas formula milk consumers are fanatical consumers with certain brands. But that condition changed, they switched to products that were cheaper in price, there was a shift that indicated a decrease in people's purchasing power.
In addition, data from the Central Statistics Agency (BPS) showed that household consumption growth slowed to only 4.2% in the second quarter of this year, down from 5.1% in the previous quarter. Rising prices of basic commodities, especially cooking oil, gas, and fuel oil (BBM), have weighed on household budgets. In addition, real wages have stagnated while inflation continues to rise, making it increasingly difficult for people to fulfill their daily needs.
The rupiah exchange rate against the US dollar has also continued to fall, even touching the level of Rp16,800 per US dollar, the lowest level in four years. The weakening of the rupiah was triggered by foreign capital outflows from Indonesia's financial markets, as well as high demand for US dollars for imports and foreign debt repayments. Bank Indonesia (BI) has to intervene in the forex market on a daily basis and raise its benchmark interest rate to maintain rupiah stability, but pressure on the national currency remains high.
Tax revenue has decreased. Especially seen in the first two months of the state budget so that it is certain that the budget deficit will swell even more. The Ministry of Finance noted that until the end of February 2025 only IDR 187.8 trillion. The total decrease in tax revenue is around 30.1 percent compared to last year.
The government also faces serious challenges in terms of state revenue. The realization of tax revenue until September 2023 only reached 75 percent of the target set in the state budget. This decline was caused by slowing economic activity and declining profits of state-owned companies. As a result, the government's budget deficit has ballooned, forcing the government to cut spending and find new sources of revenue.
Deputy Minister of Finance Anggito Abimanyu mentioned two reasons for the realization of tax revenue in January - February 2025. According to him, it was caused by a decline in the price of Indonesia's main export commodities, palm oil and coal. Second, it is due to constraints from the administrative side.
However, the government still denies that there is a decline in economic conditions, the government still does not recognize the slowdown and weakening of national economic dynamics. In fact, tax revenue was observed to have decreased. Stock investors are also leaving and withdrawing their funds, large companies are moving to areas that are considered friendly to investors and businesses.
Tax expert from Pelita Harapan University, Roni Bako, assesses that the decline in tax revenue and the weakening condition of the Indonesian economy in general is more due to the budget efficiency policy implemented by the current government, which apparently has an impact on the economy.
"Because the budget in agencies and institutions was cut massively, many activities were forced to stop, so many activities and businesses stopped. For example, the Ministry of Public Works because there is no budget, there are no road repair activities, no contractors are hired, in the end there are no entrepreneurs who pay taxes. no revenue goes to the state. Likewise, there is no hotel rental, because the budget is reduced for that, so there are no jobs and event organizers who pay taxes," said Roni when contacted by VOI, March 23.
He suggested that President Prabowo must take steps to restore the economy, for example taking progressive steps, to overcome this condition. He suggested that the President look back at the impact of the austerity policy, which turned out to have an impact everywhere.
Layoffs and Declining Middle Income
The real sector was not spared from the impact of this crisis. Waves of layoffs have occurred in various sectors, ranging from manufacturing, technology, and retail industries. For example, the layoff of thousands of workers at PT Sritex. Companies were forced to reduce their workforce due to declining demand and high production costs. The middle class, which has been the backbone of the economy, also experienced a decline in income. Many professional workers have had to accept pay cuts or lose their jobs altogether.
So, what is really going on with the Indonesian economy? Some analysts say that this condition is the result of a combination of external and internal factors. At the global level, rising US interest rates and a slowdown in the world economy have created instability in financial markets. Meanwhile, domestically, Indonesia's dependence on imports and foreign debt, as well as the lack of economic diversification, make the country vulnerable to external shocks.
The government and relevant authorities have taken several measures to address the crisis, such as raising interest rates, providing fiscal incentives, and strengthening social protection programs. However, these measures have not been sufficient to restore market confidence and boost economic growth.
Di tengah situasi yang penuh ketidakpastian ini, kolaborasi antara pemerintah, dunia usaha, dan masyarakat menjadi kunci untuk mengatasi krisis ekonomi. Perlu adanya langkah-langkah struktural jangka panjang, seperti meningkatkan produktivitas sektor riil, mengurangi ketergantungan pada impor, dan memperkuat ketahanan ekonomi nasional. Tanpa upaya serius dan terkoordinasi, pemulihan ekonomi Indonesia mungkin akan memakan waktu lebih lama dari yang diharapkan.
Sementara itu, masyarakat diimbau untuk tetap waspada dan bijak dalam mengelola keuangan pribadi, mengingat kondisi ekonomi yang masih belum stabil. Harapannya, dengan kerja sama semua pihak, Indonesia dapat melewati masa sulit ini dan bangkit kembali dengan lebih kuat.
The real sector was not spared from the impact of this crisis. Waves of layoffs have occurred in various sectors, ranging from manufacturing, technology, and retail industries. For example, the layoff of thousands of workers at PT Sritex. Companies were forced to reduce their workforce due to declining demand and high production costs. The middle class, which has been the backbone of the economy, also experienced a decline in income. Many professional workers have had to accept pay cuts or lose their jobs altogether.
So, what is really going on with the Indonesian economy? Some analysts say that this condition is the result of a combination of external and internal factors. At the global level, rising US interest rates and a slowdown in the world economy have created instability in financial markets. Meanwhile, domestically, Indonesia's dependence on imports and foreign debt, as well as the lack of economic diversification, make the country vulnerable to external shocks.
The government and relevant authorities have taken several measures to address the crisis, such as raising interest rates, providing fiscal incentives, and strengthening social protection programs. However, these measures have not been sufficient to restore market confidence and boost economic growth.
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