Indonesia: Inflation faces upside risks on high energy costs – UOB

Enrico Tanuwidjaja, Economist at UOB Group, and Yari Mayaseti, comment on the upcoming VAT raise and the Indonesian inflation.

Key Takeaways

“We estimated an increase of 1ppt of VAT from 10 to 11% and higher cigarette excise tax to bring about additional 0.3-0.7ppt to headline inflation.”

“Mild impact will be felt due to the many exclusions on the goods and services subjected to this increase.”

“However, risk to headline inflation will be felt more from the recent upheaval of geopolitical tensions that have brought about higher energy and food prices.”