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Deflation Hat-trick! RI's Economic Alarm Is Sick

Indonesia was hit by deflation of 0.37% in May 2025 on a monthly basis (month to month/mtm). This deflation is the third deflation throughout the year after January (-0.76%) and February (-0.48%). 

Executive Director of the Center of Economic and Law Studies (CELIOS) Bhima Yudhistira said this deflation is a danger alarm for the Indonesian economy. Economic growth in the second quarter of 2025 is projected to be less than 5%. 

"This is a yellow light, there are signs of slowing economic growth in the second quarter of 2025," Bhima told detikcom, Monday (2/6/2025). 

Bhima said prolonged deflation indicates that most people are holding back on spending. This makes the economy more challenging in the future. 

"This is not a success in controlling inflation, but demand pull inflation is not moving up. This means that the population is large, but most are holding back on spending. Slow household consumption means that the economy in the future is more challenging," said Bhima. 

Senior Economist of the Institute for Development of Economics and Finance (INDEF) Tauhid Ahmad said the root of this problem is because there are not many jobs created. As a result, there is no increase in people's income in aggregate, instead there is an increase in layoffs. 

"Because many people are laid off, many people are holding back on purchases and if we look at them, they are using their savings for survival. So they make reserves to buy, but don't spend a lot," he added. 

Government Must Resolve Quickl 

Senior Economist of the Institute for Development of Economics and Finance (INDEF) Tauhid Ahmad assessed that the government must move quickly to resolve this problem. Because if not, the condition will worsen for the common people. 

"There must be an effort to take the initiative to reduce the effects of globalization. First, diversify export destination countries, destinations for products received outside the US market and negotiate tariffs so that the impact on the country can be reduced," suggested Tauhid. 

"Then the six stimulus packages are enough to cushion the lower class, but not enough for the middle class. So the stimulus needed is a stimulus in the infrastructure and labor-intensive sectors including additional stimulus for the industrial sector because that absorbs the most jobs," he added.

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Tag: Bhima Yudhistira CELIOS Deflation