Indonesia middle class faces declining purchasing power

Economists are highlighting a decline in the purchasing power of Indonesia's middle class, characterized by a phenomenon known as 'downgrade lifestyle.' This shift involves consumers opting for cheaper, more functional products over branded or prestige items to manage economic pressure.

Data indicates a consistent decline in the middle-class population, dropping from approximately 60 million people (23% of the population) in 2018 to 46 million (16.5%) by 2025. This trend suggests that many middle-class households are becoming vulnerable to poverty as they reduce both the quality and quantity of their consumption.

In addition to downgrading, some analysts observe the 'lipstick effect,' where consumers maintain spending on small, affordable luxuries—such as beauty and personal care—while cutting back on larger expenses. Despite aggregate economic growth, consumer spending growth slowed to 1.4% year-on-year in September 2026, down from 1.8% in August. While sectors like digital media, wellness, and specialized logistics remain prospective, the overall trend shows a weakening in income and a slowdown in household consumption growth.