Jakarta. Indonesia’s economy is grappling with weakening consumer demand, as two consecutive months of deflation point to declining purchasing power and rising job losses. With Ramadan approaching, spending is expected to remain subdued as many Indonesians prioritize saving over discretionary purchases.

Data from Indonesia’s Central Statistics Agency (BPS) showed a 0.76 percent month-on-month deflation in January, followed by a 0.48 perce t decline in February. Public policy expert Achmad Nur Hidayat from UPN Veteran Jakarta said the trend reflects sluggish domestic demand, exacerbated by ongoing layoffs.

“The start of this year has been marked by two consecutive months of deflation, indicating weak household spending. Additionally, layoffs in 2024 totaled 77,965 cases, with another 4,050 recorded in January 2025,” Achmad said on Monday.

Despite the weak start to the year, he expects economic activity to pick up during Ramadan, though at a more moderate pace than in previous years. While food and beverage small businesses remain resilient, the apparel sector faces increased competition from imports.

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Ramadan Spending Faces Constraints

Seasonal spending is expected to rise ahead of Eid, fueled by government disbursement of holiday bonuses (THR) for civil servants, which will total Rp 50 trillion ($3.2 billion) in 2025, slightly higher than last year’s Rp 48.7 trillion. The government is also accelerating THR payments to ensure broader cash circulation.

“However, there are signs that people will be more selective with their spending this year,” Achmad said.

A 2024 survey indicated that 67 percent of Indonesians allocated at least 25 percent of their bonuses for Ramadan and Eid shopping. In 2025, however, economic uncertainty has prompted households to prioritize savings or debt payments over discretionary spending. Consumer confidence has also dipped, signaling cautious sentiment despite optimism in the retail sector.

The Indonesian Shopping Center Association (APPBI) projects a 15-20 percent rise in Ramadan retail transactions compared to regular months, a slower increase than the 30 percent jump seen in 2024.

Political stability and government interventions are helping to maintain economic momentum during Ramadan, but concerns about purchasing power persist. While the political landscape remains steady, financial market volatility has increased. The rupiah has weakened significantly, and the Jakarta Composite Index (JCI) has declined, indicating investor concerns about economic fundamentals.

To cushion the impact of inflation on consumer spending, the government is conducting market operations to stabilize staple food prices. This, combined with aggressive retail promotions, is expected to keep consumer spending afloat, albeit at a lower level than last year.

“Relying on THR as a yearly stimulus is not enough,” Achmad said. “The government must implement long-term policies to sustain household spending and drive economic growth beyond seasonal trends.”

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Structural Challenges to Consumer Demand

University of Indonesia economist Teuku Riefky expressed concern over the sluggish consumer spending trend leading up to Ramadan, which contrasts with previous years when demand typically surged ahead of the festive season.

“In past years, inflation dipped in January after the holiday season but rebounded by February as demand for food and transportation rose ahead of Ramadan. This year, that rebound has yet to materialize,” Riefky said in an online discussion Monday.

He attributed the weak spending to declining household incomes, which have forced consumers to focus on essential needs. Rising unemployment, lower investment, and business closures have further constrained discretionary spending.

“The decline in consumer spending isn’t just temporary—it’s a deeper structural issue linked to weakening income levels. Without addressing these fundamentals, stimulus efforts will only provide short-term relief,” he added.