The Eid homecoming tradition (mudik) has long been recognised as a driver of the national economy. An increase in population mobility leads to higher consumption across various sectors, including transportation and retail trade. However, the economic impact of this activity is not always strong enough to significantly boost economic growth.
An economist from the Faculty of Economics and Business, Universitas Gadjah Mada (FEB UGM), Wisnu Setiadi Nugroho, S.E., M.Sc., Ph.D., stated that household consumption remains the main engine of Indonesia’s economy, accounting for more than 50 percent of the Gross Domestic Product (GDP). Therefore, the Eid period often provides an additional stimulus to economic activity.
Nevertheless, Wisnu noted that the economic impact of this momentum is not always as large as expected. He pointed out that in 2025, the year-on-year economic growth in the first quarter was around 4.87 percent, lower than in previous years despite the Eid momentum. Several economists also project that second-quarter growth will only reach around 4.6–4.8 percent. These figures indicate that the consumption boost during Eid does not necessarily push economic growth beyond the five percent level.
“This means that while mudik continues to stimulate consumption, it is not strong enough to drive the economy significantly. In the context of development, Indonesia’s growth still relies on domestic consumption, which tends to be seasonal,” he explained.
In addition to domestic factors, geopolitical dynamics—such as conflicts in the Middle East, including tensions involving Iran and Israel, and the United States’ involvement—have the potential to drive up global energy prices and increase production costs. In such conditions, seasonal consumption during Eid still occurs, but its contribution to economic growth is likely to remain limited and temporary.
Inflationary Pressures from Two Sides
Besides boosting consumption, the Eid period often triggers inflationary pressures. Wisnu explained that price increases usually occur in two main categories: food and transportation, due to a sharp rise in demand within a short period.
However, in the current economic situation, inflationary pressures do not only stem from rising demand but also from potential increases in production costs. Rising global energy prices, for instance, due to geopolitical conflicts in the Middle East, can increase transportation and logistics costs, which, in turn, affect consumer goods prices.
“Therefore, price pressures ahead of Eid can come from two sources simultaneously: seasonal demand (demand-pull) and increases in production or distribution costs (cost-push),” he said.
According to Wisnu, this year’s inflation dynamics are likely to be more complex. If global energy prices rise due to geopolitical tensions, inflationary pressures may come from higher production and distribution costs. It means inflation is driven not only by increased demand (demand-pull inflation) but also by rising costs (cost-push inflation). This dynamic is important to monitor, as low-income groups are the most vulnerable to rising food and transportation prices.
“Price stabilization ahead of Eid is not only about maintaining macroeconomic inflation, but also about protecting the purchasing power of vulnerable groups,” he added.
Temporary Multiplier Effect
Mudik also drives money flows from urban areas to migrants’ hometowns. The funds brought home are typically used for family needs, local consumption, and social activities during Eid. Wisnu believes this condition provides economic benefits for small businesses in rural areas. Small shops, food vendors, local transportation services, and micro-enterprises often experience significant income increases during this period.
“Mudik does create a multiplier effect, but it tends to be short-term and consumptive rather than productive investment. Therefore, its impact on job creation and long-term regional productivity remains relatively limited,” he explained.
Economic Inequality
Wisnu stated that mudik reflects a strong economic relationship between urban and rural areas through labor migration. Cities function as centers of income generation, while regions serve as locations for redistributing consumption through family networks.
He added that this phenomenon highlights regional inequality in economic opportunities, as productive jobs remain concentrated in urban areas. Many people are forced to work in big cities because productive employment opportunities are limited in their hometowns.
He emphasized that future economic equalization efforts should focus on creating new centers of economic growth outside major cities. This can be achieved through regional industrial development, the expansion of economic infrastructure, and improvements in job quality in rural areas.
“In the context of development policy, the mudik phenomenon should serve as a reminder that the key agenda ahead is to strengthen economic growth centers outside major cities, create productive jobs in the regions, and reduce dependence on economic migration to urban areas,” he concluded.
Reported by: Shofi Hawa Anjani
Editor: Kurnia Ekaptiningrum
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