Indonesia is facing a surprising economic phenomenon: deflation for five consecutive months. Many of us may be wondering, "What does all this mean? Are we going to fall into a recession, or maybe something worse than the 1998 economic crisis that devastated the nation?" For a generation that has never experienced such a crisis, the current situation may seem nebulous. But for those who lived at that time, this condition brings an worrying sense of deja vu.
Let's discuss what's going on, why we need to pay attention to this deflation, and what impact it will have on our daily lives—from the dinner table to the future of our careers.
Deflation: Not Just Cheap Prices, But a Deeper Problem
Before panicking or ignoring it, let's first understand what deflation is. In simple terms, deflation is the opposite of inflation. If inflation is an increase in the prices of goods and services, deflation is a general decrease in the prices of goods and services. "Well, isn't that good news?" Maybe most of us think so. Falling prices mean we can buy things more cheaply, right?
However, behind the allure of lower prices, a greater threat lurks. Falling prices can be a serious symptom that demand for goods and services is falling. Why? Because in deflation, consumers tend to hold back their spending, hoping that prices will fall further. This causes demand to weaken, and manufacturers are forced to lower their prices to sell their products. But remember, even though selling prices fall, production costs do not go down. As a result, the company's profit margin declined.
Imagine a company that has to sell a product at a lower price, but still incurs the same high costs. Initially, they may only cut a small profit, but as time goes on, they will start to run out of breath. If profits continue to dwindle, the inevitable next step is cost efficiency, aka layoff.
Layoffs and the Threatening Domino Effect
Currently, we are seeing a wave of layoffs hitting various sectors, from giant private companies to state-owned companies which are often considered the safest workplaces in Indonesia. This is no longer an issue that can be taken lightly. When a company cuts costs, one of the biggest cost components they consider cutting is employee salaries.
And it's not just the big sectors that are being hit. MSMEs, which have been the backbone of the Indonesian economy, have also been squeezed by deflation. Imagine this: a small businessman who already relies on thin margins must struggle amidst a decline in demand. What happened? They will also start to scale back their business, and may even be forced to close their business. When MSMEs closed, thousands of workers lost their livelihoods, creating an even bigger wave of layoffs.
And, when people lose their jobs, their purchasing power automatically decreases. This means they will save even more on expenses. Maybe those who previously could hang out in a fancy coffee shop with a cup of coffee for Rp. 50,000, now they have to switch to cheap sachet coffee for Rp. 5,000. This process is called down trading, where consumers choose cheaper products due to limited funds.
Now imagine this domino effect. Large companies that rely on lower-middle class consumers are starting to lose revenue. Revenues decline, profits plummet, and once again, layoffs occur.
Recession at the End of the Horn?
Are we on the verge of a recession? Many economists are starting to question this. The decline in consumption is clearly visible, both in the automotive and retail sectors. Sales of cars and motorbikes—a strong indicator of people's purchasing power—started to plummet. In the automotive sector, one of my friends who works at a leasing company told me that motorbike sales, which usually continue to increase year after year, have now experienced a significant decline. This is a yellow light for all of us.
Motorbikes, which have long been considered the cheapest and most accessible means of transportation, are usually the main choice when economic conditions are bad. If motorbike sales fall, this is a strong sign that our economic situation is not good. In fact, data from BPJS Employment shows a significant increase in the number of claims, which means layoffs are happening everywhere.
When layoffs occur, more and more people lose their source of income. And when income disappears, consumption stops. When consumption stops, companies lose revenue, creating a vicious cycle that is difficult to break.
Loans, Pawn Shops, and Lurking Debt Traps
When deflation and layoffs occur, many people start looking for quick ways to survive. Unfortunately, some of us may be tempted by a dangerous shortcut: online loans (pinjol). It is no longer a secret that in the midst of a difficult economic situation, the number of loan usage has increased sharply.
When people lose income but still have to meet their daily needs, borrowing often seems like an easy way out. However, in reality, this is a snare that deepens. With very high interest and strict payment terms, borrowing will only add to the financial burden on people who are already in a slump.
Not only pinjol, many also started pawning their valuables to get quick funds. Again, this is a dangerous short-term solution. When all the assets have been mortgaged, we will be stuck in a debt cycle that is difficult to break.
What Can We Do? Survival Strategy in the Midst of Crisis
In uncertain economic conditions like these, perhaps many of us feel hopeless. However, there is always hope and opportunity, even in the midst of a crisis. Here are some steps we can take to survive and even thrive in difficult times:
Skilling Up & Reskilling
Don't just rely on one skill. The world is changing, and skills that are relevant today may no longer be needed tomorrow. Learn new things from the internet, from our surroundings, or from where we work. Don't be satisfied with just "doing the job" but also try to upgrade ourselves.
Proactive in the Workplace
If you are still working, this is the right time to prove your added value. Don't just work like a robot, but show initiative, take opportunities, and help the company survive. When companies have to make cuts, they will consider retaining people who can make a big contribution.
Avoid Debt Traps
While it may seem easy to take out a loan or mortgage an asset, be careful. This is only a short-term solution that can destroy our financial future. Don't let yourself get trapped in a cycle of debt that is difficult to break.
Be Thankful and Work Harder
If you still have a job, be grateful. There are many people out there who may not be as lucky as you. When work gets tough, think of it as an opportunity to grow and develop. Stop complaining and focus on how we can help companies survive and thrive.
Crisis or Opportunity?
Even though the economic situation seems bleak, every crisis always brings opportunities. Those who are able to adapt, improve their skills, and remain proactive will find a way to emerge from this situation stronger. Don't get caught up in negative thinking or feel helpless. Precisely in difficult times like these, we must open our eyes to hidden opportunities.
And most importantly, maintain your mental health. Financial stress and economic uncertainty can make us feel depressed, but don't let this drag us down the wrong path. Avoid escapes such as gambling, borrowing, or other things that will only make the situation worse.
In closing, let's support each other and share information. Like, comment and share this article so that more people are informed and ready to face future economic challenges. Hopefully we can all get through these difficult times strong, strong and full of hope!
