Indonesia's Inflation Continues to Slow Down Next Year, Economist Says

TEMPO.CO, Jakarta - The Executive Director of the Center of Reform on Economics (CORE) Mohammad Faisal estimated that the inflation rate in Indonesia in 2024 will be similar to this year at 2.5-3 percent y-o-y.

"[Indonesia's] inflation rate was low this year, and we expect next year will be at around 2.5 to 3 percent," he said during  CORE Economic Outlook 2024 at the National Library, Jakarta on Tuesday, Dec. 12, 2023.

According to Faisal, along with the decline in the global economy, the price moderation on energy commodities will continue next year. 

In addition, the upcoming general elections will decrease the chance for administered prices to hike. "Thus, the chance of inflation for these goods, affecting more than 75 percent of fuel oil consumers, is low," he explained.

Meanwhile, imported inflation is also expected to slow down with continued global price moderation as shown by the decline in the wholesale price index (IHPB), except for the agricultural sector.

Agricultural IHPB showed an upward trend since July, due to the El Nino phenomenon causing an increase in production prices. However, it has been slowing down at the end of the year.

Faisal also explained that imported inflation due to the Rupiah depreciation also would not be significant next year. In the same vein, core inflation from public demands is also controlled. 

"The policy to tighten monetary this year, in October to be exact, will potentially suppress the public's purchasing power next year," he said.

The high-level interest rate in October 2022 to control fuel oil inflation in September last year also contributed to the decline in people's purchasing power throughout this year. This was indicated by the downward trend of the core inflation in 2023.

DEFARA DHANYA PARAMITHA

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