Little festive cheer for Indonesia's retailers

A range of traditional Muslim veils, or hijab, displayed for sale at a market in Banda Aceh. Retailers are reporting a sharp drop in business even as Muslims in Indonesia prepare to celebrate Idul Fitri, which marks the end of the Ramadan fasting mon
A range of traditional Muslim veils, or hijab, displayed for sale at a market in Banda Aceh. Retailers are reporting a sharp drop in business even as Muslims in Indonesia prepare to celebrate Idul Fitri, which marks the end of the Ramadan fasting month.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Sales down ahead of Idul Fitri as economic growth slows and consumer confidence dips

Idul Fitri is two days away, but it has brought little cheer this year to vendors in Jakarta's Tanah Abang market, with its wide array of shops selling textiles, women's wear, shoes and other accessories.

Just ask Ms Ika Puti, 31, who sells fashion accessories such as brooches. Her shop's sales have fallen by one third compared with the same festive period last year, she said.

"There are lots of people, but they are not buying as much," lamented Ms Ika, who blames fears over the economy for the poor business.

Mr Dadang, who goes by one name and has operated a shop selling traditional long dresses for six years, has kept longer opening hours but this has not helped much.

"My regular customers went from buying two dresses to buying just one. They say they are nervous about the economic slowdown and job cuts," said the 45-year-old. "This is my worst year since I opened my shop here."

Sales are down in a month that traditionally sees strong takings, reflecting the pessimism that has gripped Indonesia as consumer confidence dips and growth is expected to ease further to below 5 per cent.

Similarly, sales of cars, motorcycles and appliances are also down, with overall figures showing a 17 per cent fall at the end of May.

This prompted the Association of Indonesian Automotive Manufacturers to lower its sales forecast for the year from 1.2 million units to between one million and 1.1 million.

Car sales are a key indicator of consumption for the Indonesian economy whose first-quarter growth was the slowest since 2009. Inflation of 7 per cent is also eroding purchasing power.

All this comes on the back of slowing employment, the World Bank noted in a recent quarterly update. As a result, consumers are setting aside more money for primary needs, the central bank noted.

"My friends and I get messages from phone chat groups warning us not to spend unnecessarily because the economy is so bad," said civil servant Natalia Dewi, who was at Tanah Abang. Ms Natalia, who usually buys three dresses and new shoes for Idul Fitri, bought only one dress this time around.

Economists do not think the Indonesian economy is as bad as people have imagined. A  lot of it has to do with perception, they say.

"What we are seeing is the insecurity of consumers as confidence dips," said Asian Development Bank country director Steven Tabor. "The Indonesian economy is not sinking. In fact it is respectable.

"Consumers have to be more positive... What we are seeing is the short-term pain the economy is going through and this is just a reflection of the prevailing pessimism."

The economists say the government needs to accelerate its spending in order to stimulate the economy, a message they have been plugging for months.

Mr Suahasil Nazara, head of the Finance Ministry's fiscal policy agency, insists that naysayers will be proven wrong. He noted that government expenditure in the four months from March to June stood at 39 per cent.

"That's not even half a year actually. So we need confidence in this economy and confidence in government implementation. The gains are ahead of us," he said.

For his part, President Joko Widodo is preparing presidential regulations to expedite budget disbursements. At a dinner with media owners last week, he urged them to stop scaring people with bad news.

Repeating the message in a speech to Indonesian businessmen several days ago, he said: "Our situation now is far from our troubles in 1998... Surely, to build a new growth engine requires time and processes." He said he was confident the government can push up growth by at least 1 more percentage point next year.

A version of this article appeared in the print edition of The Straits Times on July 15, 2015, with the headline 'Little festive cheer for Indonesia's retailers'. Print Edition | Subscribe