Indonesia is leveraging the development of its retail sector as a strategic approach to invigorate economic growthRecently, the Coordinating Minister for Economic Affairs, Airlangga Hartarto, announced that the country's economic growth achieved an impressive 5.05% in the second quarter of this year, with household consumption accounting for a significant 54.43% of the national economyAccording to pertinent data, household consumption is projected to contribute 53.18% to Indonesia's economy in 2023.
During the launch of the "Shop Only in Indonesia" campaign by the Indonesian Retailers and Shopping Center Association, Hartarto emphasized that the number of retailers in a country not only reflects purchasing power but is also a key indicator of economic growthReports from the World Bank indicate that Indonesia’s retail sector has been experiencing sustained growth since 2022. Shopping centers in Indonesia, especially in Jakarta, have been recognized among the best modern shopping centers globally, with retail sales in the Jakarta area soaring to a staggering 7 trillion Indonesian Rupiah.
Hartarto stressed that "the government is diligently working to draft and implement regulations that are beneficial to all retail businesses." The government supports retail entrepreneurs in their domestic consumption initiatives to foster economic development
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He detailed that the Indonesian government is not only enacting laws aimed at job creation but also rolling out several policies designed to facilitate business operations within the domestic marketFurthermore, consumer protection has emerged as a priority, ensuring that citizens receive quality, safe, and applicable standard-compliant products and servicesAdditionally, Hartarto advocated strengthening partnerships between shopping centers and small and medium-sized enterprises (SMEs) in order to open new avenues of business while continuously increasing the number of well-managed retail outlets.
The "Shop Only in Indonesia" initiative serves as a continuation of the "Proudly Made in Indonesia" campaign launched in 2020, which aimed at enhancing the competitiveness of local products and SMEsAccording to Budi Hadjon, the chairman of the Indonesian Retailers and Shopping Center Association, the "Shop Only in Indonesia" campaign seeks to motivate the public to purchase products from both global and local brands and to attract foreign tourists to shop in Indonesia
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This initiative is expected to uplift local purchasing power, bolster domestic trade, and stimulate national economic growth while also promoting Indonesian products on a global scale.
As a prominent economy in Southeast Asia, Indonesia holds a distinctive position in the global economic landscapeThe retail sector in Indonesia holds vast development potential and is likely to maintain its robust growth trajectory in the foreseeable future.
With an advantageous demographic advantage, Indonesia stands as the world’s fourth most populous countryAccording to authoritative forecasts, the population of Indonesia is projected to reach 281 million by 2024. More critically, the size of the domestic middle-class income group is expected to expand significantly, potentially reaching 164 million
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The vast population base and continually growing middle-income class establish a strong consumer foundation for the advancement of the retail sectorTypically, the middle-income group possesses considerable purchasing power and a strong willingness to consume, demonstrating varied demands not only in quantity but also in quality and diversityThe expansion of this demographic indicates a much broader spectrum of consumer demand in Indonesia’s retail market, catering not only to everyday consumer goods, fashion, and electronics but also to an array of leisure and entertainment services.
Since 2002, the consumption sector in Indonesia has played an exceedingly vital role in the country’s economic landscape, exhibiting robust developmental vigorIts growth rate has consistently surpassed the overall economic growth, achieving an astonishing 12%. This sustainable high-speed growth highlights consumption as a powerful driving force in Indonesia’s economic progress
The flourishing consumption sector not only stimulates the synergistic development of related industries and promotes job creation but also elevates living standards, creating a virtuous cycle.
As we enter 2024, Indonesia's retail industry has continued on its path of favorable development, maintaining notable growth momentumThis positive trend is vividly reflected in consumer confidence indicesServing as a critical metric for measuring consumer sentiment regarding economic prospects, personal income, and willingness to spend, the consumer confidence index effectively reveals the latent vibrancy within the retail marketBy July 2024, Indonesia's consumer confidence index rose to a level of 123.4, firmly entrenched in the optimistic categoryThis data indicates that consumers in Indonesia harbor a positive outlook concerning the current economic situation and their spending capabilities, underscoring their readiness to increase purchases in the retail market, thereby providing robust support for sustainable development in the sector.
Moreover, results from a retail sales survey conducted by Bank Indonesia substantiate the positive trends in the retail sector
Data from the second quarter of 2024 reveals that the national actual retail sales index shows continued growthAlthough the actual sales index dipped slightly from 229 points in June to 212 points in July, a noteworthy 4.3% year-on-year growth was still recordedThis fluctuation, while apparent month-to-month, confirms that overall, Indonesia's retail industry is still on a stable growth trajectorySuch resilience in the face of varying market conditions foreshadows continued prosperity, bolstered by Indonesia’s economic development, demographic shifts, and the evolving maturity of its consumption market, suggesting that the retail sector will likely build upon its remarkable achievements and experience sustained growth in the future.
However, challenges remain for Indonesia's retail sector, including a decline in purchasing power and a shrinking middle-income demographicWidjajas, the president of the Indonesian Shopping Center Management Association, pointed out that this downturn in the middle-income group's purchasing power is altering their shopping behaviors, predicting that retail growth this year may only see single-digit increases