JAKARTA: Indonesia is rolling out a slew of stimulus measures to get its people to spend more in the next two months, but these may not be enough to revive sluggish domestic consumption and lift economic growth, analysts say.
Instead, broader moves are needed to help the country’s dwindling middle class and protect businesses from the effects of higher United States tariffs, they add.
With the school holidays set to take place between Jun 28 and Jul 12, the government is looking to boost domestic tourism and consumption.
The government announced on Tuesday (May 27) discounts on electricity bills and transportation costs as well as cash and food handouts to selected households that will begin on Jun 5.
Indonesians will enjoy a 30 per cent discount on train tickets as well as a 50 per cent discount on sea transport. In addition, the government will cover the 6 per cent value-added tax (VAT) on airfares from early June to mid-July.
A 50 per cent discount on electricity bills will be given to around 79.3 million households with a maximum usage of 1,300 volt-amperes from Jun 5 to Jul 31.
The government will also provide 150,000 rupiah in wage subsidy for two months to about 17 million workers earning up to 3.5 million rupiah (US$215) a month.
It will give an additional 200,000 rupiah a month in staple food assistance to 18.3 million households.
With the majority of the incentives set to benefit low-income families and not the middle class, experts are questioning just how effective the stimulus will be.
“It is difficult to achieve the expected consumption boost with such (a) small benefit given to such a small number of beneficiaries,” Achmad Nur Hidayat, an economics and public policy lecturer from the Jakarta National Development University, told CNA.
Almost all of the planned incentives will benefit lower-income households, he noted. According to the Indonesian Statistics Bureau, there are 25.2 million Indonesians who live below the poverty line, surviving on less than 600,000 rupiah (US$36) monthly.
https://www.channelnewsasia.com/asia/indonesia-economic-stimulus-consumption-discounts-school-holidays-middle-class-5156421
