Economist Predicts Inflation Will Rise In January 2025

Head of Bank Permata Economist Josua Pardede. (Photo: Doc. Antara)

JAKARTA - Bank Permata economist Josua Pardede estimates that inflation will increase due to an increase in the volatile price group.

"Indonesia's Consumer Price Index (IHK) for January 2025 is estimated to record a monthly inflation rate of 0.40 percent (mom), down from 0.44 percent (mom) in December 2024," he said in his statement, Monday, February 3.

According to him, the volatile price group was the biggest driver of inflation during January. However, he estimates that monthly volatile price group inflation will rise 1.71 percent (mom), slightly lower than the previous month which saw an increase of 2.04 percent (mom).

Josua said the increase in price inflation was volatile in line with the seasonal pattern of food supply problems ahead of the harvest season. On the other hand, along with reduced demand from the holiday season, volatile price inflation tends to decline compared to the previous month.

In addition, the price index regulated by the government on a monthly basis is expected to be stable, because the government does not make significant price adjustments for energy or other goods/services.

Meanwhile, core inflation is projected to increase slightly to 0.18 percent (mom) influenced by the weakening of the Rupiah exchange rate and the increase in gold prices.

Josua estimates that year on year (YoY) the general inflation rate will increase from 1.57 percent in December 2024 to 1.94 percent in January 2025. On the other hand, annual core IHK inflation is expected to decrease slightly to 2.24 percent from 2.26 percent in December 2024.

In addition, the price index regulated by the government is expected to show an inflation rate of 1.05 percent (yoy), while the volatile price index is estimated to experience inflation of 1.82 percent (yoy).

"We estimate inflation will increase to around 2 percent in 2025, along with the revision of the regulation on the increase in VAT rates by the government," he said.

Previously, Josua assessed that domestic inflation could potentially increase by 3 percent by 2025. However, the government's recent announcement regarding the revision of the VAT rate policy could limit its impact on inflation.

Furthermore, Josua said that after a significant slowdown in 2024, inflation in 2025 will continue to be influenced by the low base effect.

According to him, despite policy-driven factors, he anticipates an increase in inflation due to the ongoing recovery in consumer demand, which has the potential to lead to an increase in moderate demand-side inflation.

"We estimate that inflation will remain within the BI target range of 1.5 percent to 3.5 percent by the end of this year," he said.