Indonesia needs some structural reforms to boost its economy, said Josua Pardede, an economist with the Jakarta-based Permata Bank, noting the country's middle class has shrunk.
Even Bank Indonesia decided on Sept. 18 to cut its benchmark interest rate for the first time since February 2021 by 25 basis points to 6 percent, the country's small businesses still hardly improve their situation. Indonesia's small businesses continued to suffer and the shrinking trend of the middle-class hasn't been reversed despite the rare rate cut announced by the country's central bank in mid-September to jump-start a weakening economy.
"We are expecting that the spending from the government and from the corporates and from the households will be increasing," said Pardede.
Yet small businesses still struggle with their operations, as street vendors in Jakarta see a decrease in both customer flow and sales volume.
"Not many customers nowadays. I don't see as many people as I did in the past," said a food vendor named Intan.
"I used to have more customers in the past, but now sales have halved," said Wini, another vendor.
"I don't know why. There are not many customers here," said a vendor named Santi.
Bank Indonesia's decision to cut interest rate aims to boost investment, loans, and consumption and ultimately propel economic growth in Southeast Asia's largest economy.
While the expected effect is yet to come by, Indonesia's middle class has plummeted from 57.33 million people, or 21.45 percent of Indonesia's total population, in 2019, to 47.85 million people, or 17.13 percent, by 2024.
This stems from layoffs and a lack of job opportunities, said Pardede, adding that a fiscal boost and some structural reforms are vital for re-energizing the country's economy.
"We need some structural reforms to absorb more labors," he said.
Bank Indonesia projected the country's 2024 GDP growth at 5.1 percent. But Prabowo Subianto, the incoming Indonesian President set to take office this October, said he wanted Indonesia's economy to have an annual growth of 8 percent in the next five years - a very ambitious target.
Indonesia needs structural reforms to boost economy: economist
