HOW DID THIS HAPPEN?
The bleak employment outlook is the result of both external and internal economic factors, analysts said.
The US-China trade war and economic uncertainty have hurt export demand in certain industries such as manufacturing and commodities, resulting in layoffs, said Teguh.
On the domestic front, the government ordered a 256 trillion rupiah (US$16 billion) budget cut for ministries and state agencies at the end of January. It also ordered a 50 trillion rupiah reduction in central government transfers to regional administrations to save a total of 306.6 trillion rupiah in state funds, in what President Prabowo Subianto said was the first of three phases.
The first phase of cuts accounts for about 8.5 per cent of Indonesia’s 2025 budget.
The government’s austerity measures meant, among others, that civil servants were no longer allowed to hold meetings at hotels or travel out of town.
Since many sectors, such as hospitality, heavily depend on government spending, this has led to massive layoffs.
The Indonesian Employers Association (Apindo) recorded almost 74,000 layoffs between January and March 2025.
It has also led to a decrease in purchasing power, which poses a problem to Indonesia’s economy as it is driven mainly by domestic consumption, said Teguh from the University of Indonesia.
As people spend less, it creates a vicious cycle which impacts many sectors, leading to job cuts or a hiring freeze.
Indonesia’s slowing economic growth in the first quarter was in spite of the fasting month of Ramadan occurring during the period, which is usually the time when people in Muslim-majority Indonesia spend the most.
Unemployment is also triggered by a mismatch between people’s competencies and job requirements, said Ahmad Ridha Sabana, presidential special staff for micro, small, and medium enterprises, as well as the creative and digital economy, at the job fair in South Jakarta on Jun 12.
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