Pertamax Price Hike's Main Impact is on Purchasing Power, Not Inflation: Indef

The primary consequence of the Pertamax fuel price increase is not inflation but a blow to public purchasing power, according to the Institute for Development of Economics and Finance (Indef). The hike disproportionately affects the middle class, who are the main consumers of this fuel.

M. Rizal Taufikurahman, head of Indef's Center for Macroeconomics and Finance, explained that amid rising interest rates, a weakening rupiah, and increased living costs, the Pertamax price hike adds to household transportation expenses. This could reduce real income and curb domestic consumption, a key driver of Indonesia's GDP.

"The greater impact is actually on people's purchasing power, especially the middle class who are the main users of Pertamax," Rizal told Tempo. He believes the biggest risk is not an inflation surge but a weakening of purchasing power and a slowdown in consumption, which fuels economic growth.

Rizal anticipates a limited direct impact on inflation. Pertamax is not the main fuel for public transport or logistics, unlike subsidized fuels. However, the 32.1% price increase could trigger second-round effects, raising operational costs for service sectors, transportation, and small businesses. It might also fuel inflation expectations, with annual inflation already at 3.08% in May 2026.

Past experience in December 2025, when Pertamax reached Rp12,750 per liter, showed it did not trigger major national inflation. Although prices later decreased, the increase still strained transportation and service sectors through adjusted business costs. Rizal concluded that the most significant impact stems from gradual price adjustments in goods and services due to increased operational expenses, rather than a direct effect on the Consumer Price Index.

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The greater impact is actually on people's purchasing power, especially the middle class who are the main users of Pertamax.