INDEF predicts this would happen if gov’t lifts subsidy for fuel and 3-kg LPG

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LPG Subsidy
INDEF Director of Macroeconomics and Finance M Rizal Taufikurahman (Source: INDEF YouTube channel)

Jakarta, IO – The economy grew by 5.01% in Q1-2022, near the pre-pandemic level. The Institute for Development of Economics and Finance (INDEF) hopes this performance can be maintained throughout 2022.

“However, the government’s plan to increase electricity tariff will push up production costs and have a domino effect on local raw material prices in the intermediate and downstream industries, affecting efficiency. This may lead to companies downsizing its workforce,” said INDEF Director of Macroeconomics and Finance M Rizal Taufikurahman on Wednesday (11/5).

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For this reason, the government should refrain from lifting subsidies for fuel and 3-kg LPG, even though it is within the range of market prices. This is because it can potentially slow the economic growth momentum due to increased inflation rate.