Indonesia's Inflation Rate Will in Peak in July After Fuel Prices Kick in
Indonesia's inflation rate in June was 1.03 percent, a significant rise compared to the previous month (deflation of 0.03 percent). Although the government's decision to increase the price of subsidized fuel in the second half of June 2013 already made an impact on the country's inflation rate, it is expected that in the next two months inflation will peak over two percent. Apart from the fuel price, other factors that will cause high inflation are the start of the holy fasting month (Ramadan), the new school year and the higher electricity rate.
The government expects inflation to be around 7.2 percent in 2013. However, various analysts expect that the real outcome will add one more percentage point on top of that number. In June, annual inflation reached 5.90 percent. July's inflation rate will depend a lot on the supply of food products. If supply is sufficient, inflation may be kept down to 1.5 percent. Although the Ramadan is a fasting month, in the evening and early morning people will usually gather and eat at organized parties. This results in higher demand for food products during that month. On average, the Ramadan triggers 1.0 percent inflation. This year, the Ramadan will start on (or around) 9 July 2013. Indonesia's central bank (Bank Indonesia) is expected to raise its key interest rate next week from the current 6.0 percent.
| 2013 | Inflation |
| January | 1.03% |
| February | 0.75% |
| March | 0.63% |
| April | -0.10% |
| May | -0.03% |
| June | 1.03% |
| Total | 3.35% |
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Inflation (annual percent change) |
9.8 | 4.8 | 5.1 | 5.4 | 4.3 | 3.5¹ |
¹ year to date
Source: Statistics Indonesia