Protests over price hikes in Indonesia will continue, with low risks for businesses

Students and unions are planning periodic rallies through October against the Indonesian government’s Sept. 3 decision to raise subsidized gasoline and diesel prices by 30.7 percent and 32.0 percent, respectively.

The government’s decision to cut fuel subsidies was prompted by a law requiring the budget deficit to be below 3% of GDP in 2023. Based on monthly data through July, this year’s budget showed a slight surplus on strong commodity-driven revenues. The government expects the benefits of high commodity prices to diminish at the end of 2022 and into 2023, as commodity prices have recently fallen significantly (notably palm oil).

The Indonesian government would also like to redirect budget spending towards longer-term initiatives to stimulate economic growth rather than subsidies.

Inflation will worsen following the rise in fuel prices, giving impetus to anti-government protests. Inflation eased slightly in August due to the slight decline in food prices. Following the government’s announcement of fuel price adjustments, we expect inflation to peak at 7% yoy in September, before slowly declining below 6% yoy in early 2023 and 4% year-over-year by September 2023.

Inflationary pressures in Indonesia Data as of September 2022

Student protests

The rising cost of living will provide the initial impetus for students to protest, and these are likely to continue for the next few months until price changes moderate.

The scale and locations of the protests are likely to remain similar to previous student protests: a few hundred to a few thousand students in Jakarta, mostly in places such as the parliament complex, the horse statue roundabout near the palace Presidential and Hotel Indonesia. roundabout.

Outside of Jakarta, students protested against regional legislatures or government buildings. Some of the protests in Jakarta and other cities have led to altercations with police and the burning of tires. Protesters did not target office buildings, malls or other commercial properties and showed no intention of doing so.

Labor demonstrations

The labor protests have been led mainly by a large trade union coalition that has regularly staged anti-government protests: the Indonesian Confederation of Labor Unions (known by its Indonesian acronym KSPI). As with the student protests, members of the KSPI and other smaller unions staged protests in front of government buildings, parliament and regional legislatures rather than industrial parks or factories. Beyond scuffles with security forces, these protests are generally peaceful and unlikely to result in violence causing significant property damage.

The KSPI and other unions are demanding that the government reverse the fuel price hike and raise the minimum wage by 10-13%. They are also calling for the repeal of the Job Creation Act, which they consider disadvantageous for workers.

The protests are not supported by the main political parties, indicating that they are unlikely to turn into broader discontent against the government.

The government of President Joko “Jokowi” Widodo is supported by seven of the nine parties in parliament, controlling a total of 82% of parliamentary seats. This largely eliminates the risk of government instability.

Indicators of the evolution of the risk environment

The risk environment could change if one or more of the following events occurs:

  • A major pro-government party criticizes the government over high fuel and other commodity costs, indicating its likely intention to support the protests.
  • The government signals that it is ready to revise a government regulation that defines the annual minimum wage formula to allow for higher wage increases in 2023, or shows its openness to tripartite negotiations with employer groups and trade unions, reverting to its previous method of deciding the annual minimum wage increase. Such actions would reduce the momentum of the protests.

  • Sustained large-scale protests over several months or incidents of violent protests would increase the likelihood that the government will reverse its price hike – a policy stance adopted in response to prolonged or large-scale protests from previous administrations.



Posted on September 28, 2022 by Anton AlifandiAssociate Director, Country Risk, S&P Global Market Intelligence

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Bree NeffDirector, News & Research Management, Economics & Country Risk, S&P Global Market Intelligence


This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.