In July 2023, the manufacturing sector in Indonesia continued its expansion for the 23rd consecutive month, as reflected in the Manufacturing Purchasing Managers' Index (PMI), which rose to 53.3 from 52.5 in June 2023. This growth in the PMI was driven by an increase in new domestic and export demand, indicating optimism among business players as the economic conditions improve. Moreover, inflation in July 2023 continued its downward trend, registering at 3.08% year-on-year, a significant decrease from June 2023's rate of 3.52% year-on-year. This decline in inflation was influenced by a slowdown in price increases across all components. Core inflation also followed the downward trend, reaching 2.43% year-on-year in July (compared to 2.58% year-on-year in June), mainly due to a deceleration in price increases for almost all categories of goods and services. The administered price inflation continued to decrease to 8.42% year-on-year in July (compared to 9.21% year-on-year in June), reflecting well-managed domestic energy prices amidst fluctuating global crude oil prices. Food price inflation experienced deflation of 0.03% year-on-year, down from 1.20% year-on-year in June, primarily due to controlled prices of various chili and shallot varieties owing to abundant stocks.
The government remains committed to controlling national inflation and has implemented various policies through the Central Inflation Control Team (TPIP) and Regional Inflation Control Team (TPID) to maintain food price stability. These efforts include market interventions, cheap food programs, ensuring rice supply sufficiency, and facilitating food distribution to anticipate price fluctuations. Additionally, the government has provided fiscal incentives amounting to IDR 1 trillion in 2023 to support inflation control at the regional level. As of July 31, 2023, IDR 330 billion has already been disbursed for the first period. These measures demonstrate the government's consistency in controlling national inflation and optimizing the role of the state budget as a shock absorber. With these initiatives and policy innovations at the regional level, the government aims to maintain price stability and achieve the year-end inflation target of 3%±1%.
