Jakarta. Indonesia's middle class is coming under renewed pressure after a surprise interest rate hike was followed by a steep increase in non-subsidized fuel prices, raising concerns over household spending and consumption growth.

Bank Indonesia raised its benchmark BI Rate by 25 basis points to 5.50% on Tuesday. A day later, Pertamina increased the price of Pertamax gasoline to Rp 16,250 per liter from Rp 12,300. Economists warn that the combination of higher borrowing costs and fuel prices could significantly strain middle-income households.

"For the middle class, this means more expensive mortgage payments, heavier vehicle loan installments, rising school transportation costs, higher commuting expenses, and savings that are depleted more quickly," UPN Veteran Jakarta Economist Achmad Nur Hidayat said in a statement on Wednesday.

Achmad said that Indonesia's middle class has long served as the backbone of domestic consumption but often ends up bearing the costs of economic adjustment measures.

"When the government needs to stabilize the rupiah, interest rates are raised. When energy prices are adjusted, users of non-subsidized fuel -- most of whom belong to the middle class -- absorb the higher costs," he said. "Yet when social assistance is distributed, they are considered too well-off to qualify. When taxes, lending rates, tariffs, and energy prices rise, they are always viewed as strong enough to shoulder the burden."

Achmad argued that the middle class remains a critical pillar of the economy, serving as taxpayers, bank borrowers, homebuyers, education consumers, and the primary driver of household spending.

"If this group becomes fragile, the national economy will lose its main buffer," he said.

Data from Indonesia's Central Statistics Agency (BPS) show that middle-class and aspiring middle-class households account for more than half of the country's population and contribute over 80% of household consumption. As a result, weakening purchasing power among this group could have broad implications for economic growth.

Achmad also highlighted the shrinking size of Indonesia's middle class. The number of middle-class Indonesians declined from 57.33 million people in 2019 to 47.85 million in 2024, meaning around 9.5 million people fell out of the category within five years.

"This is not a minor decline. It is a socioeconomic alarm," he said. "People who were once able to save, pay mortgages, buy insurance, and provide better education for their children are now having to recalculate even their most basic expenses."

Achmad urged policymakers to place greater emphasis on middle-class resilience when designing economic policies, arguing that the impact of higher interest rates, tariffs, energy prices, and taxes on household finances should be a key consideration.

He called on the government to expand social protection programs for vulnerable and lower-middle-income groups affected by rising living costs. He also stressed the need to accelerate the development of affordable public transportation to reduce dependence on private vehicles.

In the financial sector, Achmad said banks should apply lending-rate increases proportionally and transparently so as not to place excessive pressure on borrowers. On the fiscal side, he urged policymakers to be more responsive to the challenges facing middle-income households.

"Healthy economic growth is not only about GDP figures, but also about families' ability to maintain their standard of living without continuously draining savings or taking on more debt," he said.

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