JAKARTA - PT Bank UOB Indonesia said it expects Indonesia's inflation rate to rise by 0.2% by the end of 2025 to 2.5% from 2.3% realised at the end of December 2024.

According to Vera Margaret, Head of Deposit and Wealth Management at UOB Indonesia, speaking on behalf of the bank's economists, the increase in inflation this year will be fuelled by higher food prices and basic needs.

Margaret attributed this to the El Nino phenomenon last year. "The prolonged dry season caused our food to not produce as much as it should. So, the supply is reduced, and the demand is more than the supply, so prices rise,’ she explained briefly.

This imbalance of supply and demand is projected to continue throughout 2025, causing prices to continue to rise.

In addition, the price increase is also further fuelled by the weakening of the rupiah against the US dollar.

"Because we import a lot, when the rupiah weakens against other currencies and the US dollar, the prices that come into Indonesia tend to be more expensive," Margaret said at UOB's Media Gathering on Financial Strategy Amid Economic Challenges held today (24/1).

Furthermore, Margaret revealed UOB Indonesia economists' prediction that by the end of 2025, the rupiah will break IDR16,500. “Maybe we will experience the worst in the third quarter, at IDR 16,800,” Margaret said. (ZH/LM)