Retailers Brace for Gloomy Ramadan Amid Economic Slowdown

Indonesian retailers could see tougher days to persist next year as they wade through a storm of weak rupiah and waning consumer demands, analysts at Credit Suisse Securities Indonesia say. (JG Photo/ Dhana Kencana)

By : Rahajeng KH & Ridho Syukra | on 11:02 AM July 03, 2015
Category : Business

Jakarta. Indonesian retailers are predicting sales to drop by 36 percent year-on-year during the Muslim holy month of Ramadan and Idul Fitri, the latest sign of the country’s weakening economy.

Sales are expected to reach Rp 15 trillion ($1.12 billion) during the fasting period, which runs from June 18 through July 17,  compared to Rp 25 trillion in the same period last year, according to estimates from the Indonesia Retailers Association (Aprindo).

Members of the association range from convenience store chain operators such as Sumber Alfaria Trijaya to hyper market operators like Matahari Putra Prima.

Aprindo chairman Roy N. Mandey said consumers' purchasing power has been under pressure this year due to rising inflation stemming from fluctuating oil prices, the weakening rupiah and slow government spending.

President Joko Widodo shifted government subsidies for fuel prices this year to back up his $21 billion infrastructure projects. However, only 8 percent of the funds were disbursed in the first six months 0f 2014 due to red tape, dragging further on the country's economy, which is already struggling against low commodity prices and slowing investment.

Based on current conditions, Aprindo has revised its 2015 sales target to Rp 152 trillion from its initial total of Rp 184 trillion — a 10 percent contraction from last year’s sales of Rp 168 trillion.

“People are not as enthusiastic [as before]. They are refraining from buying anything now,” Roy said.

A recent consumer confidence survey from Bank Indonesia, the country's central bank, showed that consumers have become less optimistic about their income and job availability, holding back on buying durable goods like electronics, motor vehicles and home appliances.

Still, Matahari Putra Prima, one of the largest retailers in Indonesia and a Jakarta Globe affiliate through the Lippo Group, remains confident it will see an 11 percent increase in sales during Ramadan to Rp 3 trillion from Rp 2.7 trillion last year, banking on its expansion in the eastern part of the country.

The company now operates 111 stores under the brands Hypermart, Foodmart and Boston Health & Beauty.

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