Retail Growth in Ramadan
A Kompas report (04/25/2019) has warned about the possibility that retail growth during Ramadan this year may not be as high as in previous years.
It claims that people will refrain from shopping because of global economic uncertainty while some consumers prefer shopping online.
The Bank Indonesia (BI) Consumer Survey saw an increase in the Consumer Confidence Index (IKK) a month before Ramadan. However, from some of BI’s consumer surveys this year, we have captured some concerns among consumers about the prospects of income and job availability.
This shows that the expectations and concerns of the people about the prospect of the global economy and the domestic economy have begun to influence their spending behavior. It seems this condition will not only take place during Ramadan, but also in the next few months. In general, the consumers index trend that continues to decline since the beginning of the year is a picture of declining consumer optimism. Concerns about the possibility of decreasing income and reduced employment make them tend to refrain from shopping.
Anticipation of this uneasy conditions in the near future is also indicated with an increase of fund allocation for deposits. On a macro scale, this kind of consumer behavior will have an impact on domestic consumption and then also on national economic growth.
Cautions regarding global economic uncertainty have indeed been raised several times by a number of world institutions, including the question on the possibility of an economic recession in the United States, which will certainly have an impact on the Indonesian economy.
The International Monetary Fund (IMF) has lowered its global economic growth projection for 2019 to 3.3 percent. This is lower than the 2018 growth of 3.7 percent and the projection of October 2018. This growth revision is based on uncertainty and risk due to trade wars and other factors.
In terms of people’s purchasing power, BI sees it is still relatively well-maintained. One indicator is that core inflation that reflects domestic consumption is still high, despite deflation in February. However, we also see that the relatively stable people’s purchasing power in the first quarter was due to the government’s fiscal stimulus to boost purchasing power.
Maintaining people’s purchasing power amid various pressures in the future is important here for economic stability. This condition must be responded by the government, both in the form of anticipatory policies facing global uncertainty and maintaining the continuity of national economic growth and maintaining people’s purchasing power, including through various stimuli and job creation programs.
For the retail sector, Ramadan and the situation in 2019 in general are challenges that must be anticipated, including through innovation and a more responsive attitude toward consumer needs.
In the past two years, retailers have complained about the decline in sales performance. The retail industry seems to be going nowhere. Some large retailers went bankrupt due to a shift in consumer behavior into online shopping, tight competition and failure to innovate. The rapid growth of the middle class could be an indication of the still large potential of the retail business in Indonesia.