Annual headline inflation at 2.28 percent (y/y) in September 2023 is well below the pace of 3.27 percent (y/y) in the preceding month. Again, in last year September, the country had seen some heavy inflation as the government raised prices of subsidized fuels.

Nonetheless, we could actually argue that the m/m inflation rate of 0.19 percent in September 2023 is (actually) a bit high as the month of September normally brings modest deflation to the biggest economy of Southeast Asia.

And, we see two factors behind relatively high September 2023 inflation: (1) per 1 September 2023, non-subsidized fuel prices were raised by Pertamina (involving RON 92 Pertamax, Pertamax Turbo, Dexlite and Pertamina Dex), and (2) increasing rice prices also impacted on inflation (which could be related to weak harvests amid unusually dry weather conditions (Southeast Asia currently feeling a strong El Nino weather phenomenon).

And, interestingly enough, per 1 October 2023 prices of non-subsidized fuels are to be raised further in Indonesia. Pertamina, Shell Indonesia, BP–AKR, and Vivo Energy Indonesia have all confirmed that they will raise prices of non-subsidized fuels. For example, Pertamax will see a 5.3 percent increase from IDR 13,300 per liter to IDR 14,000 per liter. The main reason for another price adjustment is that international oil prices have risen quite significantly between June 2023 and October 2023. And, secondly, the price increase comes at a time when overall Indonesian inflation is low, and thus price pressures are more manageable for the people. But it does mean that we can expect to see higher-than-usual inflation in October 2023 too.

In the first nine months of 2023, Indonesian inflation has now accumulated to 1.63 percent (year-to-date). With only three more months to go, we keep our projection for Indonesian inflation in full-year 2023 at the range of 2.50 – 3.00 percent (y/y). But we do add that chances are much more likely that inflation will be closer to 2.50 percent than to 3.00 percent.


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