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Indonesia to see higher Q3 growth even with fuel price hike, minister says

Published Tue, Aug 30, 2022 · 04:24 PM

Indonesia’s economic growth this quarter is expected to be higher than the 5.44 per cent rate in Q2, even with a potential fuel price hike, a senior Cabinet minister said on Tuesday (Aug 30).

South-east Asia’s biggest economy is considering raising prices of some fuels to rein in its ballooning energy subsidies budget, a move that would increase everyday costs for businesses and consumers and stoke inflation.

“We still see that GDP growth this quarter can be better than last quarter,” Luhut Pandjaitan told an economic seminar held by the Indonesian Employers Association (Apindo). He said higher private spending as the country recovers from the Covid-19 pandemic would still drive growth.

Amid expectation of imminent fuel price hike, Indonesia’s finance minister on Monday announced that the government will reallocate 24.1 trillion rupiah (S$2.26 billion) of its fuel subsidy budget to social spending.

Lawmakers from parliament’s energy committee last week told Reuters the government may raise fuel prices by 30 per cent to 40 per cent and that such a move will add 1.9 percentage points to the inflation rate this year.

Indonesians currently pay 7,650 rupiah per litre for its most popular petrol product, which authorities say is about 40 per cent below the estimated market price, while subsidised diesel is sold at 5,150 rupiah per litre, about a third of the market price.

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At the same event on Tuesday, Industry Minister Agus Gumiwang Kartasasmita said he believed an adjustment in petrol prices will not significantly impact production costs of middle- to large-sized industries, but he said a diesel fuel price hike may cause a 10 per cent to 15 per cent rise in the cost of some goods. REUTERS

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