As of October 2024, household savings in Indonesia are on the decline. According to data from Bank Indonesia (BI), the average balance of household savings per account has dropped to IDR 6.58 million, the lowest level in 2024. This is a significant reduction, reflecting a broader trend in the country’s financial landscape.

Similarly, the average savings in the form of deposits has also fallen. At IDR 4.19 million per account, this figure marks the lowest since the start of the year. Muhammad Iqbal, Director of SME and Retail Funding at Bank Tabungan Negara (BTN), noted that 2024 has been a tough year. “People are forced to tap into their savings to cope with rising living costs,” he explained.

BTN, in particular, has seen a noticeable drop in savings from households with under IDR 100 million in their accounts. This group’s average balance has decreased from IDR 3 million in January 2019 to just IDR 1.8 million in October 2024. This trend is consistent with broader economic conditions.

Indonesia’s GDP growth has slowed, with household consumption remaining stagnant at below 5%. At the same time, deflation has persisted for five months in a row since May 2024. Manufacturing activity has also contracted, as indicated by the Purchasing Managers’ Index (PMI), which has remained below 50 since July 2024.

Despite these challenges, Iqbal remains optimistic. He believes that 2025 will be a better year for the economy, citing the potential for lower policy rates and government programs like free nutritional initiatives and the 3 Million Houses Program to help stimulate growth.

Lani Darmawan, President and Director of CIMB Niaga, agrees that savings have declined. She attributes this to both the rising cost of living and a shift in investment behavior, particularly among the higher-income groups. “People are moving their money into other investment instruments rather than keeping it in savings accounts,” she said.

Lani forecasts that the downward trend in savings will continue until at least the first half of 2025. Meanwhile, Josua Pardede, Chief Economist at Bank Permata, stresses the need for structural reforms to stimulate the economy. He suggests accelerating industrialization, enhancing Indonesia’s role in global supply chains, and increasing the participation of SMEs in domestic markets.

Pardede also advocates for fiscal policies that support the middle class, particularly in urban areas. This includes improving public services like transportation, affordable housing, and accessible education. He also calls for the formalization of the informal sector, leveraging the digital economy to boost tax revenue without raising tax rates.

The future of household savings in Indonesia hinges on the successful implementation of these reforms. While 2024 has been a year of financial strain, experts remain hopeful that 2025 will see positive changes.

CNNINDONESIA