Indonesia: Inflation surprised to the upside in December – UOB

Economist at UOB Group Enrico Tanuwidjaja assesses the latest inflation figures in Indonesia.

Key Takeaways

“Indonesia’s headline inflation rate turned higher to 5.5% y/y in Dec from 5.4% in Nov, averaging 4.2% for 2022, which is almost triple the 2021’s average of 1.6%, and more than double the 2% average during the 2020 pandemic year.”

“The food, beverage, and tobacco price hikes alongside higher transportation prices led inflation to continue accelerating at 0.7% m/m. We expect overall inflation will stay elevated for months ahead as the second-round impact from the higher fuel prices has not been fully transmitted.”

“We keep our 2023 average inflation forecast to trend down slightly lower to 4%. We also keep our forecast for BI to continue hiking to reach its peak point of 6% in 1Q23, after raising a cumulative 200 bps during 2022 to 5.50%.”