Indonesia's slowing consumption is weighing on growth as weaker household spending, rising layoffs, and a shrinking middle class put pressure on the economy.
Purpose
Whether weakening household consumption was becoming a structural drag on Indonesia's growth, and what could reverse the slowdown.
Findings
- 01Indonesia's Q1 2025 growth slowed to 4.87%, with weaker household consumption emerging as a key drag on an economy where consumption accounts for over half of GDP.
- 02Rising layoffs and a shrinking middle class are weakening consumer confidence, creating a feedback loop between lower household spending, weaker business revenues, and further job losses.
- 03With consumer savings falling to their lowest levels since 2021, households are prioritising necessities over discretionary spending, putting consumer-facing industries under pressure.
- 04Lower interest rates and planned government stimulus could provide a near-term recovery, but restoring consumer confidence and employment remains critical to breaking the slowdown.