What is Middle Class - The BPS defines the middle class as those having a per capita expenditure of between 2 million and 9.9 million rupiah per month, or 3.5 to 17 times the World Bank’s poverty line.
The majority of those who used to be in the middle-class range have since been downgraded to the aspiring middle class. According to the statistics bureau, the number of aspiring middle class - those who earn 1.5 to 3.5 times the poverty line or between 874,398 and 2.04 million rupiah a month - rose from 128.85 million in 2019 to 137.5 million this year. They form 49.22 per cent of Indonesia’s population.
The dwindling of the middle class has raised red flags . Their declining number and purchasing power could trigger an economic slump as demand for goods decreases.
In 2018, middle-class consumption accounted for 41.9 per cent of total household consumption in Indonesia. By 2023, this figure had dropped sharply to 36.8 per cent, aligning with an overall slowdown in household consumption, according to data from the Institute for Economic and Community Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI).
Wealth Inequality - And as the middle class shrinks, the country is experiencing an annual gross domestic product increase of around 5%, which also paints a picture of widening wealth inequality in Indonesia.
Some experts even warned that Indonesia could suffer the same fate as Chile, another country which saw steady economic growth but a declining middle-class population. Social inequality and price hikes paved the way to years of protests and unrest in the South American country between 2019 and 2022.
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