As we have often noted in our inflation analyses over the past six years, peaks in Indonesian inflation correlate with administered price adjustments. Hence, when there is an absence of such peaks then chances are big that there have not been made any significant adjustments to fuel and electricity prices. And, indeed, throughout 2018 there were stable administered prices of commodities such as fuel and electricity. The government had already announced that it would not raise these prices in a bid to support people’s purchasing power.

However, it should not be considered a coincidence that energy subsidies are not cut in the year prior to legislative and presidential elections (which are scheduled for April 2019). If the government would decide to raise prices of subsidized fuels and electricity, then it would surely undermine the popularity of both the political parties that in the ruling coalition and incumbent President Joko Widodo who is seeking a second term in the upcoming elections (in 2017 there had been a very modest peak in inflation as the government gradually cut electricity subsidies in the first half of the year).

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This articles discusses:

Indonesia's monthly inflation in December 2018
Indonesia's annual inflation in full-year 2018
how the 'political year' contributes to low inflation

Read the full article in the December 2018 edition of our monthly research report. You can purchase this report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number: +62(0)8788.410.6944

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