Consumer Price Index of Indonesia: Higher-Than-Expected Inflation in December 2022
Indonesia ended 2022 with a modest increase in inflationary pressures. Indonesia’s Statistical Agency (or BPS) announced that December 2022 inflation reached 0.66 percent month-on-month (m/m), higher than our forecast of around 0.50 percent.
It also means we now have the full 2022 inflation figure for Indonesia: 5.51 percent year-on-year (y/y). While this is the highest calendar year inflation rate of Indonesia since 2014, we bet central bank officials are pleased. Not only was there the threat of heavy imported inflation due to elevated global food and energy prices, but there was also a significant upward adjustment in Indonesia’s subsidized fuel prices at the start of September 2022 (although these were partly absorbed by public subsidy spending in the transportation sector).
And most analysts seem to agree that the inflation rate of Indonesia will ease in 2023, back into the central bank (Bank Indonesia)’s target range of between 2.0 and 4.0 percent (y/y). This is in line with global inflation that also shows a declining trend, albeit remaining elevated above historic averages. On the other hand, though, there remain plenty of uncertainties (including the Russo-Ukrainian war that could escalate into an even worse situation). And so, it is too early to conclude that we are safe now from high inflation. Meanwhile, the world’s inflation policies come at a high price as economic recessions are looming in the United States and European Union.
What is important to point out in terms of easing global inflation is that such easing can partly be explained by the high base one year earlier. So, with US inflation at 7.1 percent (y/y) in November 2022, one could be relieved and argue that it is a much better situation than the 9.1 percent (y/y) of US inflation set in June 2022. However, the 7.1 percent of US inflation in November 2022 comes on top of an already very high base of 6.8 percent (y/y) in November 2021. Therefore, there remains plenty to be concerned about, price-wise.
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