Economists Project Indonesia's Inflation 2.33 Percent By The End Of 2025

Illustration. (Photo: Doc. Antara)

JAKARTA - Bank Permata economist Josua Pardede projects that Indonesia's inflation rate will increase again to 2.33 percent by the end of 2025, up from 1.57 percent by the end of 2024.

This projection considers various factors, including the end of discounted electricity rates and pressures from domestic demand to rupiah depreciation.

The Central Statistics Agency (BPS) announced that Indonesia experienced an annual deflation of 0.09 percent on an annual basis in February 2025. This is the first time this has happened since the latest annual deflation was recorded in March 2000.

"Because the government has limited the discount on electricity rates for a two-month period, we continue to expect inflation to remain within the Bank Indonesia target range of 1.5 - 3.5 percent by the end of 2025, unless the policy is extended for the whole year," said Josua, quoted by Antara, Tuesday, March 4.

Josua explained that the deflation that occurred throughout early 2025, especially until February, was influenced by the provision of discounted electricity rates.

Data shows that the Consumer Price Index (JCI) year-to-date (ytd) until February recorded a deflation of 1.24 percent. The electricity tariff discount itself contributed 1.47 percent in January and 0.67 percent in February. If you don't take into account the impact of the policy, YTD inflation should have reached 0.9 percent.

This discount remains the dominant factor behind deflation, where electricity discounts for prepaid users were reflected in January, while the impact of electricity discounts on postpaid users was only reflected on deflation in February 2025. Thus, the price index regulated by the government (AP) continues to record deflation, "he said.

However, with the end of the electricity tariff discount, there is the potential for normalization in the form of an increase in inflation of 2.14 percent. In addition, inflationary pressures are also expected to come from the continued recovery of domestic demand and imported inflation due to rupiah depreciation.

"Outside of policy-driven factors, we anticipate inflationary pressures stemming from the ongoing recovery in consumer demand, which could contribute to moderate demand-side inflation. In addition, rupiah depreciation is expected to encourage imported inflation, which will increase overall price pressure," he said.

The Head of BPS Amalia Adininggar Widyasanti explained that the deflation that occurred was mostly influenced by a 50 percent discount on electricity rates for PLN customers with a power of 2,200 volt ampere (VA) or lower.

The government regulated price component (administered price) experienced deflation of 9.02 percent (yoy), contributing to deflation of 1.77 percent (yoy).

However, two other components, namely core inflation (core inflation) and volatile price components, still record price increases on an annual basis.

Core inflation increased to 2.48 percent (yoy) in February 2025, while volatile price inflation was at the level of 0.56 percent yoy.

A number of food commodities, such as cayenne pepper, garlic, and fresh fish, are still experiencing price increases, contributing to annual inflation.

"Usually the purchasing power is associated with the core component. This core component contributes the largest inflation with a (contribution) contribution to inflation (yearly) value of 1.58 percent," he said.

He said that a number of food and tobacco commodities also experienced annual inflation, such as cayenne pepper, garlic, kale, onions, fresh fish, cooking oil, powder coffee, hand-kretek cigarettes (SKT), and machine kretek cigarettes (SKM), causing inflation in volatile price components.

"The volatile price component experienced inflation (yearly) of 0.56 percent (yoy) with a (contribution to the value) of inflation (yearly) of only 0.10 percent," he said.

Amalia said that in February 2025 there was a monthly deflation of 0.48 percent on a monthly basis (mtm) with a decrease in the Consumer Price Index (IHK) from 105.99 in January 2025 to 105.48 in February 2025.

"Year-on-year (yearly) there is also a deflation of 0.09 percent and in the calendar year (year-to-date/ytd) there is a deflation of 1.24 percent," he said.