Surge in Non-Subsidised Fuel Prices Could Trigger Inflation, Purchasing Power at Risk of Erosion

JAKARTA - The rise in non-subsidised energy prices is assessed to potentially suppress public purchasing power and slow the pace of domestic consumption in the coming quarters. Researcher from the Indonesia Forum for Budget Transparency, Badiul Hadi, stated that the increase in high RON fuel prices, which has reached 30 to 40 per cent in several periods, as well as the 12 kg LPG which has risen by around Rp 50,000 to Rp 60,000 per cylinder, does not only impact direct consumers. According to him, the surge in energy prices also drives up production and distribution costs broadly. “Empirically, an energy price increase of 10 to 20 per cent can add around 0.2 to 0.5 percentage points to inflation within 1 to 2 quarters,” Badiul told Kontan on Sunday (19/4/2026). According to Badiul, the impact on purchasing power is particularly felt by the bottom 40 per cent of households. Although not dropping drastically immediately, the purchasing power of this group is estimated to erode by around 1 to 2 per cent in real terms due to chained increases in basic needs prices. The rise in non-subsidised energy triggers layered pressures, from heightened inflation expectations, reduced business margins, to shifts in consumer spending patterns from non-essentials to basic needs. As a result, rather than a sharp contraction, a gradual slowdown occurs. He estimates that household consumption could slow by around 0.1 to 0.3 percentage points, thereby holding economic growth at the lower end of the target, namely around 4.8 to 5.1 per cent. “This means the quality of economic growth is declining. The economy still grows, but with weakening momentum, especially in the informal sector and SMEs,” he explained. In addition, controlling inflation transmission channels through stabilisation of logistics and distribution costs, as well as maintaining strategic food prices, is key. Improvements in subsidy governance are deemed important to prevent consumption shifts that could burden the fiscal position. Meanwhile, from the business actors’ side, strategies that can be pursued include energy and supply chain efficiency, as well as gradual price adjustments to avoid shocks to consumers. “Without a combination of such measures, cost pressures risk turning into a deeper and more prolonged economic weakening,” he added. The price of Pertamax (RON 92) remains at Rp 12,600 per litre, while Pertamax Green 95 is also unchanged at Rp 12,900 per litre.