A stunning move from Indonesia has further upended global food markets already shaken by Russia’s invasion of Ukraine. Indonesia's palm oil export ban jolts global food inflation and could backfire, economists at Natixis report.

The ban will likely further push up food prices

“Indonesian President Joko Widodo announced a ban on the export of palm oil. The ban covered both crude and refined palm oil exports. The government implemented the export ban to mitigate rising food prices and quell local unrest, but the fallout may upend the country’s economy anyway while forcing global prices even higher.”

“The impact of higher palm oil prices will reverberate across the globe. The trend is negative for food inflation, and that means worse purchasing power for everyone.”

“For Indonesia, while the ban may push down domestic cooking oil costs, it puts depreciating pressure on the IDR as palm oil is its key export earning product. Meanwhile, imports are getting more expensive as the depreciating IDR adds to cost pressure through the pass-through of a weaker FX. As such, its ban of palm oil export is well-intentioned but may backfire.”