A government move to reduce crucial fuel price subsidies could hit Southeast Asia’s largest economy hard, analysts warn.
Indonesia, which enjoys some of the world’s lowest petrol prices thanks to $20 billion in annual fuel subsidies, could see prices rise between 13 U.S. cents and 25 cents —an increase of up to 46 percent—in November, according to analyst estimates.
As a result, annual inflation is expected to spike high above the central bank’s range of 3.5 to 5.5 percent.
United Overseas Banking (UOB) is predicting fuel prices to increase 46 percent by November, which will bring the average inflation rate to 6.5 percent this year. Meanwhile, Barclays is expecting a 23 percent rise in November, followed by another increase in 2015, resulting in a 6.2 percent inflation rate for 2014.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.