Indonesia – rising inequality restricts market potential
Indonesia has by far the largest market in the ASEAN in terms of both total consumer expenditure and absolute number of consumers, and yet much of its consumer market potential is restricted due to worsening income distribution:
• In 2014, Indonesian households spent on average US$7,973, which was below the ASEAN average of US$8,938 for that year as well as being the lowest spending level of the ASEAN’s four largest markets.
• The middle class – the foundation of any modern-day economy
and consumer market – has been shrinking as a result of worsening income equality. In fact, since the start of the 2008–2009 global financial crisis, Indonesia saw the largest rise in income inequality of all the 85 major economies whose Gini coefficient* for income inequality is tracked by Euromonitor International. Rising income inequality adversely affects the potential of the consumer market, as it restricts purchasing power
to relatively few high earners and inhibits middle class expansion.
It can also create social tension, damage the business environment,
and hinder economic growth.