As Costs Rise in Indonesia, Small Businesses Take Different Approaches to Pricing

By Kekeletso Nkele, small.news Assistant

(small.news) — As Indonesia’s currency weakens and global energy prices climb, small business owners across the country are facing a common pressure: rising costs. According to reporting by Channel News Asia (CNA), they’re responding in different ways — some holding prices steady, others raising them to stay afloat.

Why Costs Are Rising

The pressure stems from a combination of factors: a weakening rupiah, which has lost as much as 7.8% of its value against the US dollar over the past year and hit a record low in June, and higher global energy prices tied to the conflict in the Middle East. Indonesia’s Central Bank reports that cooking oil, red chili, and soybean prices have all climbed since the conflict escalated in late February.

Those cost increases have rippled into layoffs, too. Indonesia’s Ministry of Manpower recorded more than 43,000 job losses between January and June — a 34% increase over the same period last year. Economists note the real number is likely higher, since nearly 60% of Indonesian workers are in the informal sector and not tracked by the ministry.

The government has introduced some relief measures, including a free school meal program that has eased food prices during the school holidays, and a 26.3 trillion rupiah stimulus package covering food assistance, transport incentives, and temporary employment programs for the second half of 2026. Economists remain divided on whether that’s enough to offset the broader economic pressure.

Raising Prices To Stay Solvent

For some business owners, rising costs have made price increases unavoidable. Susilowati, who runs a catering business in Jakarta, raised her prices by up to 10% after concluding that switching to cheaper ingredients would hurt her food’s quality. “It was a hard decision,” she told CNA. Satay vendor Mulyadi added 1,000 rupiah to every item on his menu, telling CNA that some longtime customers complained — but that the alternative was losing money. “There was no other way,” he said. “Everything is more expensive now.”

Holding Prices Steady

Other business owners have chosen to absorb the added cost instead. In Bogor, barbershop owner Supriyanto has charged just 5,000 rupiah (roughly US$0.31) per haircut since 2008 — a fraction of what many working-class barbershops charge. He told CNA that many of his 30 to 50 daily customers are informal workers for whom even a small increase would matter.

Feby Aulia, who sells nasi padang — a spiced West Sumatran rice dish — from a food van in Bogor under the name Duo Putri, has kept her price at 12,000 rupiah per meal since 2022, even though it means serving smaller portions than a typical sit-down restaurant would. The decision has drawn steady lunch crowds; her stall typically sells out by 1 pm. On the outskirts of Jakarta, Koharuddin sells fresh milk from his home for 12,000 rupiah per liter — about half the price of established brands — a price he hasn’t changed in five years, even as costs have risen for the farmers who supply him.

What’s Ahead For Both Groups

The path forward is uncertain for business owners on both sides of this decision. A recent interim accord between the US and Iran was intended to ease tensions and stabilize prices, but sporadic clashes have persisted, and the rupiah has shown little sign of recovery — meaning the cost pressures driving both responses are unlikely to ease soon. Bhima Yudhistira, executive director of the think tank Center of Economic and Law Studies (CELIOS), told CNA that the government needs to establish clearer policy and improve the ease of doing business to attract investment.

Business owners who raised prices, like Susilowati and Mulyadi, are now watching to see whether customers adjust or continue to push back. Those who held steady face their own risks: Supriyanto’s landlord has put the property his shop sits on up for sale or has listed the building housing his shop for sale as the neighborhood has grown more valuable, and Feby’s food van operates without the security of a fixed lease, leaving her exposed to changes in local parking or zoning rules.