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REUTERS/Henry Romero
People's Purchasing Power Weakens In Early 2025: Deflation, Mass Layoffs, And Global Crisis Are The Main Triggers
Friday, 28 Mar 2025
The decline in people's purchasing power is reflected in the deflation that occurred in early 2025. Although the government considers deflation a sign of successful price control, economists actually consider that this condition reflects weak public consumption.
Professor of Management Science at the Muhammadiyah University of Surakarta (UMS), Anton Agus Setyawan, highlighted the impact of weakening purchasing power on the manufacturing sector. He said that pressure in this sector contributed greatly to the increasing unemployment rate.
"In early 2025, almost 14,000 formal workers lost their jobs due to the decline in the manufacturing sector. This affected household income and ultimately decreased people's purchasing power," Anton said in an official statement published on the UMS.ac.id page, Wednesday, March 19, 2025.
According to Anton, the decline in public spending also hit the trade and services sectors. This situation was exacerbated by global economic uncertainty after the COVID-19 pandemic, which is still triggering economic, energy, and geopolitical crises.
He considered that the government's steps to provide electricity tariff cuts and plan toll road subsidies during the Eid holiday were not enough to overcome structural problems in the economy.
"More concrete steps are needed, such as expanding social assistance programs. For example, increasing the number of recipients of Direct Cash Assistance so that people's purchasing power is maintained," he said.
In addition, Anton suggested that the government provide grants to micro, small, and medium enterprises, as well as incentives for the manufacturing industry. This step is believed to help stabilize the economy in the short term.
