Ramadan Economy: Maintaining Consumption Amidst Weak Purchasing Power

Ramadan has arrived. Minimarket shelves are filled with syrup, dates, and canned biscuits. Advertisements for Ramadan-specific products are appearing everywhere. As in previous years, consumption is predicted to surge, but this time, the purchasing power of the public is being tested.

Ramadan is not only a month of worship but also a moment for social and economic activities. Household consumption surges, and business actors enjoy increased sales.

Employees receive holiday allowances (THR), and underprivileged groups also benefit from the increase in social spending. Like a rising tide that lifts all boats, Ramadan brings blessings to all levels of society.

Household consumption remains the mainstay of Indonesia's gross domestic product (GDP), reaching 54.04 percent in 2024 (BPS).

Indonesia's quarterly GDP data shows that the highest growth usually occurs in the second quarter, coinciding with Ramadan. Ramadan should indeed serve as a catalyst for economic growth.

The government has made maximum efforts to maintain purchasing power. As a result, inflation was maintained throughout 2024 (1.57 percent year on year/yoy), even continuing in January 2025 (0.74 percent).

However, the domestic economic situation remains quite challenging. The Central Statistics Agency recorded economic growth in 2024 at only 5.03 percent, slightly slower compared to the previous year.

Household savings have decreased compared to the previous year, even dropping by 23 percent compared to 2020. This phenomenon will make the public more cautious in spending during Ramadan.

Indonesian consumer behavior during Ramadan is driven by two main motivations: utilitarian (basic needs and religious needs) and hedonistic (fashion, parcels, entertainment, and electronics).

Nielsen research (2024) shows that Indonesian people tend to be more generous during big days.

In line with this, there is usually a shift in consumption patterns to become more inelastic to price. Taking the example of staple goods, consumers will still purchase beef or chicken even if the prices increase.

Various reports also indicate an increase in internet and social media usage during Ramadan. The peak time for online shopping also tends to extend to the period between breaking the fast and pre-dawn meals. Digital content consumption will clearly rise, providing opportunities for the private sector to enhance product exposure.

On the bright side, Indonesian consumers are still optimistic. In January 2025, the Consumer Confidence Index (CCI) remained at an optimistic level of 127.2. Consumers tend to have positive expectations about future economic conditions.

The first key to making Ramadhan an optimal catalyst is to understand the shift in consumer behavior. From there, nudges to consumers can be done effectively.

The second key is managing consumer optimism. Optimism will grow if people are able to meet their primary needs. This means that basic necessities must be adequately supplied or have stable prices.

The government's guaranteed purchase price (HPP) policy at the farmer level will increase the optimism of people who depend on businesses in the primary sector. If effective, this policy will have a major impact on the income and purchasing power of 28 million farming households.

The eight economic stimulus measures that the government has just announced can be a driving factor for consumption if implemented properly. Various discounts (toll rates and airline tickets) and shopping festivals (BINA Discount, Friday Mubarak) can boost consumers' positive mood.

We need to amplify the religious and social momentum of Ramadhan in public spaces. Public communication with positive emotions, such as joy, enthusiasm, and the spirit of Ramadhan needs to be carried out massively.

However, execution is key. Without real steps, the economic momentum of Ramadan that should be a catalyst is simply missed. All groups should get a share of the blessings of the month of Ramadan. As exemplified by the Prophet Muhammad SAW who did not let an orphan be sad at the moment of Eid al-Fitr.

Irfan Kurniawan, Trade Analyst at the Ministry of Trade