In line with our forecast, Indonesia recorded mild deflation in August 2023. Based on the latest data from Statistics Indonesia (BPS) Indonesian deflation was recorded at 0.02 percent month-on-month (m/m) in August 2023. But because deflation was milder than last year, Indonesia’s annual inflation accelerated to 3.27 percent (y/y).
Indonesia’s annual headline inflation at 3.27 percent year-on-year (y/y) in August 2023 is higher than the 3.08 percent (y/y) of inflation we saw in July 2023. However, the increase is probably quite short-lived as Indonesia’s annual inflation rate should ease in September 2023.
Why? Because inflation in last year’s September was heavily affected by the central government’s decision to raise prices of subsidized fuels (these prices were raised by an average of around 25 percent) amid high international oil prices.
However, interestingly enough, the Indonesian government decided to raise prices of non-subsidized fuels (such as Pertamax Turbo, Dexlite and Pertamina Dex) per 1 September 2023. And so, there are again higher-than-usual inflationary pressures in Indonesia in September 2023, but these will probably not be as big as last year, and so there is room for easing annual headline inflation (after all, the subsidized fuels are much more popular and therefore have more impact on inflation in society).
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