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Sluggish Purchasing Power: Ramadan and Eid al-Fitr Deemed Unable to Boost the Economy in the First Quarter of 2025
The Center of Economic and Law Studies (CELIOS) estimates that money circulation will weaken during Ramadan and Eid al-Fitr 2025. This situation is expected to impact suboptimal national Gross Domestic Product (GDP) growth.
CELIOS Economics Director Nailul Huda stated that layoffs in the first two months of 2025 were a major factor in weakening consumption. This was reflected in the January 2025 Consumer Confidence Index (CCI), which declined by 0.4 percent overall. month-to-month .
However, historically, between 2022 and 2024, the CCI typically increased in January due to consumer optimism at the start of the year. Weakening consumer confidence also occurred in February 2025.
Other data also show a similar pattern. The Real Sales Index (RSI) in January 2025 fell to 211.5, lower than the 222 recorded in December 2024.
"This means that consumers are uncertain about the economy in 2025, which is driving our retail sales down. As a result, people's purchasing power will plummet further in early 2025," Huda said in his statement.
Given these conditions, Huda estimates that cash flow during Ramadan and Eid al-Fitr 2025 will be weaker than last year.
"The additional narrow money supply (M1) during Ramadan and Eid al-Fitr in 2025 will decrease by -16.5 percent compared to the same period in 2024. The additional money supply will only reach IDR 114.37 trillion. Meanwhile, in 2024, the additional money supply during Ramadan and Eid al-Fitr will reach IDR 136.97 trillion," Huda said.
Impact on Economic Growth
CELIOS Executive Director Bhima Yudhistira added that the decline in money circulation during Ramadan and Eid al-Fitr this year will impact the formation of less than optimal national GDP.
Based on CELIOS modeling, the additional GDP due to Ramadan and Eid al-Fitr in 2024 will reach IDR 168.55 trillion. However, in 2025, this figure is predicted to drop to IDR 140.74 trillion, a 16.5 percent decrease.
"Meanwhile, business profits were only Rp84.19 trillion, far below last year's additional revenue of Rp100.83 trillion," said Bhima.
reached 46.4 percent of total DPK (Third Party Funds). This had never happened at the beginning of the previous administration.
At the start of the Jokowi-JK period, individual savings accounted for 58.5 percent and Jokowi-Amin's accounted for 57.4 percent.
"The decline in personal savings indicates that people are tending to survive by draining their savings, as real wages are too low, benefits are reduced, and the threat of layoffs persists," Bhima added.
Economic Growth in the First Quarter of 2025 is Expected to Weaken
With these various economic indicators, CELIOS estimates that economic growth in the first quarter of 2025 will only reach 5.03 percent overall. This figure is lower than the growth in the first quarter of 2024, which reached 5.11 percent.
Bhima stated that the growth forecast takes into account the impact of Ramadan and Eid al-Fitr in 2025, which cyclically boosted household consumption compared to the fourth quarter of 2024.
However, seasonal factors followed by the distribution of THR still cannot make the economy grow higher.
"There are even concerns that the economy will slow down after Eid, as there will no longer be a significant driver of consumption. The government's massive spending cuts are also impacting consumer confidence . The weakening rupiah is also increasing public caution in spending," Bhima concluded.
Source: infobanknews
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