Pandemic Spending of Indonesia’s Lower Class Stimulates National Economy

JAKARTA, KOMPAS.com – Indonesia’s lower-class society has been keeping busy during the coronavirus pandemic by doing plenty of shopping, according to former Indonesian Finance Minister Chatib Basri.

Chatib said the Covid-19 crisis has changed the pattern of consumption in the country.

While various sectors of the Indonesian economy came under great pressure, the food and beverages sector has been performing relatively well as it is an essential sector to meet daily needs.

“[During the pandemic] People are not going to reduce the amount of food they consume, but they will for non-essential recreation such as visiting restaurants, hotels and using transportation which has all incurred significant drops.”

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The country’s lower class is driving the strong performance of the food and beverages sector as many have spent their money on food during the coronavirus pandemic.

Since the Covid-19 crisis began in Indonesia, those on the lower rung of the ladder continue to purchase goods essential to meet their daily nutrition.

“The richer a person is, the larger the portion of non-essential shopping they will do. But if they are poor, then once that person has money, they will use it to buy food.”

A Bank Mandiri research revealed that purchases made by Indonesia’s lower-class society have reduced by 84 percent compared to normal conditions.

That figure is much higher than the purchases made by the country’s middle class which stands at 70 percent while the biggest drop is seen from Indonesia’s upper class.

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“What is interesting is that the lower class has been spending though perhaps not shopping because there has been a reduction in purchases for non-essential items.”

Chatib added that the middle class typically spend on non-essentials such as traveling, expensive products, and buying properties, however, those are three goods that cannot be bought through online shopping.

His advice to push for a recovery of the Indonesian economy is for the government to sustain the purchasing power of Indonesia’s lower class via social assistance programs such as direct cash assistance and its Family Hope Program.

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To spur restoration of the Indonesian economy, Chatib also suggests the government push the upper class to spend their money during the coronavirus pandemic.

This can be done by demonstrating to the upper-class Indonesians that the government’s Covid-19 response is adequate and solid.

“What needs to be done is for the lower class to keep spending supported by social assistance programs while encouraging the middle to upper class to spend.”

(Writer: Yohana Artha Uly | Editor: Bambang P. Jatmiko)

Source: https://money.kompas.com/read/2020/12/02/191500926/chatib-basri--masyarakat-kelompok-bawah-paling-banyak-belanja-saat-pandemi