Again, we were surprised by the low level of inflation in Indonesia. While usually we see rising inflationary pressures in the month of November (ahead of the peak in the December-January period), this time it was a different story.
Data from Indonesia’s Statistical Office (Badan Pusat Statistik, BPS) showed that the country’s inflation rate reached 0.09 percent month-on-month (m/m) in November 2022, much lower than the historic average in the month of November.
With only one more month to go, the year-to-date inflation rate of Indonesia grew to 4.82 percent, implying it is quite likely that inflation will remain (significantly) below 5.5 percent year-on-year (y/y). This would be modest inflation considering a few months ago – after the central government raised prices of subsidized fuels on 3 September 2022 – we expected inflation to touch 7 percent (y/y) at the year-end.
Meanwhile, on a year-on-year basis, Indonesian inflation eased to 5.42 percent. If we take a look at what has been causing inflationary pressures so far in 2022, then there are two categories that stand out (as they do around the world): food and fuel prices. And so, BPS data reveal that the transportation expenditure group contributed 1.86 percent to the total of 5.42 percent (y/y) in annual inflation, while the food, drinks and tobacco category contributed 1.50 percent to the total of 5.42 percent. It means that both categories together contribute 62 percent to total inflationary pressures in Indonesia. So, it is certainly clear where most price pressures originate from.
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