And so, the full-2023 headline inflation rate of Indonesia is also lower-than-expected at 2.61 percent year-on-year (y/y), while our projection stood at the range of 2.75 – 3.00 percent (y/y). Inflation around 2.6 percent is quite decent, especially when the country’s economic growth is around 5.0 percent (y/y). And, the full-2023 figure is also markedly lower than the 5.51 percent (y/y) inflation rate we saw in 2022, the year when the Russo-Ukrainian war (and the West’s response to this war) caused high energy prices, while high global interest rates and the fragile rupiah gave rise to imported inflation.

Meanwhile, Indonesia’s annual inflation increased modestly in December 2023 from a rate of 2.56 percent (y/y) in November 2023.

Three factors were behind inflation in December 2023. Firstly, the foods, drinks and tobacco expenditure group was the biggest contributor, especially because of rising prices of red chili peppers, onions, tomatoes, rice and chicken eggs. It is common to see food prices rise as society consumes more amid the festive season in December.

Secondly the personal care and other services expenditure group experienced heavy inflation because of high gold prices (that caused prices of gold jewelry to rise) amid the Federal Reserve’s high interest rate environment. Thirdly and also very common during the festive season, airplane ticket prices increased significantly in December 2023.


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