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INCOME AND EXPENDITURE:

INDONESIA
Euromonitor International
May 2017
INCOME AND EXPENDITURE: INDONESIA Passport I

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 Case Study on Gross Income by Age: Indonesia ......................................... 2
Chart 3 Gross Income Distribution in Indonesia ........................................................ 2
Social Class Composition ............................................................................................................. 3
the Countrys Middle Class Is Set To Keep Rising.................................................................... 3
Chart 4 Case Study on Social Class Composition: Indonesia ................................... 4
Chart 5 Overview of Indonesias Social Classes ....................................................... 4
Household Income Distribution ..................................................................................................... 5
Indonesias Income Gap Is Expected To Continue Narrowing .................................................. 5
Chart 6 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 Countrys Largest Consumer Market ............................................................ 7
Chart 8 Indonesias 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 Passport 1

INCOME AND EXPENDITURE:


INDONESIA
Backed by the partial rebound in global commodity prices, growth of Indonesias 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 countrys 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 SWOT Analysis: Indonesia

Source: Euromonitor International

GROSS INCOME BY AGE

the Age Segment 30-34 Commands the Highest Average Gross Income
Levels
Indonesias 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 countrys 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 leisure 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 Case Study on Gross Income by Age: Indonesia

Source: Euromonitor International

Chart 3 Gross Income Distribution in Indonesia

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Source: Euromonitor International from national statistics


Note: Data for 2017-2030 are forecasts

SOCIAL CLASS COMPOSITION

the Countrys Middle Class Is Set To Keep Rising


Indonesias 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 countrys fastest growing through to 2030,
generating opportunities for companies offering products in categories like leisure and
recreation, personal care products, and clothing and footwear;
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 Case Study on Social Class Composition: Indonesia

Source: Euromonitor International

Chart 5 Overview of Indonesias Social Classes

Source: Euromonitor International from national statistics


Note: Data for 2017-2030 are forecasts

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HOUSEHOLD INCOME DISTRIBUTION

Indonesias Income Gap Is Expected To Continue Narrowing


Income inequality levels in Indonesia are moderate by both global and regional standards:
The countrys 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 countrys rising middle class.

Chart 6 Household Income Distribution in Indonesia

Source: Euromonitor International from national statistics


Note: 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, Indonesias 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 levels through to 2030, in line with the expected
performance of the Indonesian economy over that period;
However, this base scenario faces significant downside risks due to trends in global
commodity prices and potential shocks to the countrys 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 Consumer Spending in Indonesia

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

Chart 8 Indonesias Consumer Market by Region

Source: Euromonitor International from national statistics/UN/OECD


Note: 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 Indonesias 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);
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.

Chart 9 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;
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 Spending by Household Type in Indonesia

Source: 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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