Indonesia Braces for Ramadan Inflation Amid Stimulus Measures

Indonesia is preparing for the annual surge in demand during the month of Ramadan, a period traditionally marked by increased consumption. While the government has introduced a US$762 million stimulus package to bolster spending, economists anticipate inflationary pressures will rise above 3% during the holy month, driven by factors including lingering effects from previous electricity discounts and potential supply chain disruptions.

Government Stimulus Package

Ahead of Ramadan, which is expected to start this week with Eid al-Fitr falling in late March, the Indonesian government unveiled a 12.83 trillion rupiah (US$762 million) stimulus package on February 10th. The package aims to maintain people’s purchasing power and increase mobility during the busiest shopping season of the year. Key components include transport fare cuts and food handouts, intended to encourage travel and shopping activity. Coordinating Economic Affairs Minister Airlangga Hartarto stated the package is designed to “increase mobility and maintain people’s purchasing power … to make a positive contribution to national economic growth.” Officials also hope to bolster early-year economic growth momentum, particularly in the first quarter.

Inflationary Pressures

Despite the stimulus, Bank Indonesia (BI) projects that inflation during Ramadan will exceed 3%. Deputy Governor of BI, Aida S. Budiman, indicated that food supplies are currently well-maintained and prices remain within projected ranges. However, the ongoing impact of electricity discounts implemented in January and February 2025 will likely keep inflation figures slightly above 3% through March 2026.

January 2026 saw a year-on-year inflation rate of 3.55% with a Consumer Price Index of 109.75, exceeding BI’s target range of 2.5% plus or minus one percent. BI anticipates inflation will stabilize below 3% later in 2026.

Rising Food Prices

Seasonal demand is already driving up prices for essential food items like chili, rice and poultry across Indonesia. While supply and inflation risks are currently considered manageable, the potential for further price increases remains a concern as Ramadan approaches.

Economic Context

Indonesia experienced its fastest pace of inflation in nearly three years in January, according to its statistics bureau. This increase is partially attributed to a “low base effect,” where current inflation growth appears higher due to lower figures from the same period last year.

Ramadan and the subsequent Eid al-Fitr celebration are traditionally peak consumption periods in Indonesia, characterized by increased spending on food, clothing, and travel as millions return to their hometowns for the holidays.