Income and Expenditure Indonesia

INCOME AND EXPENDITURE: INDONESIA Euromonitor International May 2017

INCOME AND EXPENDITURE: INDONESIA

LIST OF CONTENTS AND TABLES Chart 1

SWOT Analysis: Indonesia........................................................... ................ 1

Gross Income by Age ........................................................ ........................................................... 1 the Age Segment 30-34 Commands the Highest Average Gross Income Levels ..................... 1 Chart 2 Chart 3

Case Study on Gross Income by Age: Indonesia ......................................... 2 Gross Income Distribution in Indonesia ........................................................ 2

Social Class Composition ............................................................. ................................................ 3 the Country’s Middle Class Is Set To Keep Rising............................................................... ..... 3

Chart 4 Chart 5

Case Study on Social Class Composition: Indonesia ................................... 4 Overview of Indonesia’s Social Classes ....................................................... 4

Household Income Distribution ................................................................ ..................................... 5 Indonesia’s Income Gap Is Expected To Continue Narrowing.................................................. 5

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Household Income Distribution in Indonesia ................................................ 5

Consumer Expenditure by Category ............................................................................................ 5 Communications Is Set To Be the Best-performing Category .................................. ................ 6 Chart 7

Consumer Spending in Indonesia ..................................... ........................... 6

Consumer Expenditure by Region ........................................................... ..................................... 7 Jawa Barat Is the Country’s Largest Consumer Market....................................................... ..... 7

Chart 8

Indonesia’s Consumer Market by Region..................................................... 7

Consumer Expenditure by Income .......................................................... ..................................... 8 Rich Households Set To Enjoy the Biggest Rise in Discretionary Spending Capacity ............. 8 Chart 9

Consumer Spending by Income Type in Indonesia ...................................... 8

Consumer Expenditure by Household Type ................................................................................. 9 Single-person Households Are Expected To Be the Fastest-growing Market .......... ................ 9 Chart 10

Spending by Household Type in Indonesia ................................................ 10

Regional Comparison ........................................................ ......................................................... 10 Chart 11

Indonesia versus Selected Asia Pacific Economies ................................... 10

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INCOME AND EXPENDITURE: INDONESIA Backed by the partial rebound in global commodity prices, growth of Indonesia’s per capita disposable income and spending recovered in 2016. This, combined with rising government social spending, continued to drive a decline in income inequality and the expansion of the middle class. Over the long term, the country’s young population, middle class growth, and evolving consumer preferences are expected to be important determinants of the performance of the Indonesian consumer market.

Chart 1

Source:

SWOT Analysis: Indonesia

Euromonitor International

GROSS INCOME BY AGE

the Age Segment 30-34 Commands the Highest Average Gross Income Levels 

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Indonesia’s young demographic profile is reflected in the distribution of gross income: As a share of individuals in the top income band (ie those with an annual gross income over US$150,000), the age group 35-39 is predominant. By 2030, Indonesians aged 30-34 will represent the largest share of the top income band (due to the country’s young demographics), supporting demand for upscale products in family-related categories like education, transport, and household goods and services;

In terms of total gross income, the highest concentration can be witnessed in the age group 15-36, mainly as a result of the large number of individuals within this age cohort; Indonesian Young Adults are growing more engaged in technology and social media, and seek to define their own “cultural style”. As a result, they constitute an attractive market for categories like communications, clothing and footwear, and leis ure and recreation;


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A long-term increase in disposable income levels has made more Indonesian consumers look beyond price in the purchases of goods and services. After a slowdown observed in 2015, growth of income and spending of Indonesian households recovered in 2016, on the back of the partial rebound in commodity prices; higher availability of credit; and easing inflation.

Chart 2

Source:

Chart 3

Case Study on Gross Income by Age: Indonesia


Gross Income Distribution in Indonesia


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Source: Note:

Euromonitor International from national statistics Data for 2017-2030 are forecasts

SOCIAL CLASS COMPOSITION

the Country’s Middle Class Is Set To Keep Rising Indonesia’s sustained economic expansion, coupled with rising levels of social spending by the Indonesian government, are allowing a growing number of lower-income households to gain access to higher social classes: As a result, social class C (the middle class) showed the strongest rate of expansion between 2011 and 2016, and it is forecast to remain as the country’s fastest gr owing through to 2030, generating opportunities for companies offering products in categories like leisure and recreation, personal care products, and clothing and footwear; 

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Expected rising levels of income will also cause social class D to become the biggest in Indonesia by 2030 (surpassing social class E, or the lowest-income class), increasing demand for discretionary spending categories over this timeframe.


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Chart 4

Source:

Chart 5

Source: Note:

Case Study on Social Class Composition: Indonesia


Overview of Indonesia’s Social Classes

Euromonitor International from national statistics Data for 2017-2030 are forecasts


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HOUSEHOLD INCOME DISTRIBUTION

Indonesia’s Income Gap Is Expected To Continue Narrowing 

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Income inequality levels in Indonesia are moderate by both global and regional standards: The country’s income gap declined over 2011-2016, as a result of rising levels of disposable income and increasing government social spending during this period; Over 2017-2030, income inequality in Indonesia is anticipated to continue gradually falling, which will expand the market for companies serving the country’s rising middle class.

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Source: Note:

Household Income Distribution in Indonesia

Euromonitor International from national statistics Data for 2017-2030 are forecasts. Data are in constant US$

CONSUMER EXPENDITURE BY CATEGORY


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Communications Is Set To Be the Best-performing Category Due to increasing disposable income, Indonesia’s share of essential spending (expenditure on food, non-alcoholic beverages and housing) is anticipated to decline over 2017-2030, allowing a growing number of households to access discretionary goods and services: After a deceleration in 2015, the real rate of expansion of the Indonesian consumer market is expected to stabilise at relatively high l evels through to 2030, in line with the expected performance of the Indonesian economy over that period; 

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However, this base scenario faces significant downside risks due to trends in global commodity prices and potential shocks to the country’s external sector; Communications is forecast to be the fastest-growing category over 2017-2030, due to rising penetration rates of internet services and digital devices like laptops, smartphones and tablets amongst the expanding middle class.

Chart 7

Source:

Consumer Spending in Indonesia

Euromonitor International from national statistics/UN/OECD


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Note:

Data for 2017-2030 are forecasts

CONSUMER EXPENDITURE BY REGION

Jawa Barat Is the Country’s Largest Consumer Market An important determinant of spending levels is the condition of the urban/rural split, which has led to a growing trend of urbanisation in the country (as poor rural households migrate to cities in an attempt to improve their incomes): Jawa Barat (or West Java) accounts for the largest share of total co nsumer expenditure in Indonesia, on the back of the province’s vast population; 

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However, on a per household basis, DKI Jakarta (the Special Capital Region of Jakarta) ranks top, reflecting Jakarta’s status as the political, economic and cultural centre of the country; Over 2017-2030, Kepulauan Riau, Papua, and Kalimantan Timur are forecast to be Indonesia’s fastest-growing consumer markets, driven by anticipated stronger population expansion in these provinces.

Chart 8

Source: Note:

Indonesia’s Consumer Market by Region

Euromonitor International from national statistics/UN/OECD Data for 2017-2030 are forecasts


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CONSUMER EXPENDITURE BY INCOME

Rich Households Set To Enjoy the Biggest Rise in Discretionary Spending Capacity Households in decile 1 have to channel about three-fifths of their spending to cover basic necessities: Miscellaneous goods and services (principally financial services, personal care products, and insurance), and clothing and footwear are Indonesia’s most discretionary spending categories. Conversely, housing, and food and non -alcoholic beverages are the least discretionary (ie those to which deciles 1, 5 and 10 allocate a broadly similar share of their spending); 

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Decile 10 is expected to record the largest increase in the share of discretionary spending over 2017-2030, which will back demand for the aforementioned more discretionary spending categories.

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Consumer Spending by Income Type in Indonesia


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Source:

Euromonitor International from national statistical offices/OECD

CONSUMER EXPENDITURE BY HOUSEHOLD TYPE

Single-person Households Are Expected To Be the Fastest-growing Market Couples with children account for over two-thirds of total consumer expenditure in Indonesia, representing a vast market for categories like food and non-alcoholic beverages, clothing and footwear, and education: Nevertheless, increasing tertiary education enrolment rates, rising female participation in the labour market, and lifestyle changes of Indonesian Young Adults are leading to the strong rise of single-person households in the country; 

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This fast-growing household type is expected to support demand for categories like communications, alcoholic beverages and tobacco, and leisure and recreation in the long run.


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Chart 10

Source:

Spending by Household Type in Indonesia

Euromonitor International from national statistical offices/OECD

REGIONAL COMPARISON Chart 11

Indonesia versus Selected Asia Pacific Economies


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Source:

Euromonitor International from national statistics


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Income and Expenditure Indonesia

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