THURSDAY, March 28, 2024
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Indonesia braces for higher inflation and slowdown in economic recovery

Indonesia braces for higher inflation and slowdown in economic recovery

JAKARTA, April 9 (Xinhua): The Indonesian government has said the country is preparing to face a spike in inflation in the coming months caused by high global commodity prices, which may lead to a slowdown in the post-pandemic economic recovery.

Finance Minister Sri Mulyani Indrawati said Friday at the Asean (the Association of Southeast Asian Nations) Finance Ministers and Central Bank Governors Meeting (AFMGM) session that the surge in the global commodity prices was believed to happen as the spillover effect of the Ukraine crisis.

"This is a serious challenge for all policy makers, maybe not only in Indonesia, but all Asean countries," the minister said.

Indonesia's Consumer Price Index in March rose by 2.64 percent year-on-year, the highest increase since April 2020, according to the country's Statistics Indonesia (BPS).

The Indonesian people have seen a surge in cooking oil prices up to 6 percent in the domestic market since the government removed the price cap on cooking oil in February following an increase in international crude palm oil (CPO) prices.

In the Southeast Asia's largest economy, most of the cooking oil used by the people is sourced from palm oil.

Indonesia, the world's largest palm oil producer, experienced the impact of the high prices of global CPO last month amid the supply bottleneck of sunflower oil due to the Ukraine crisis, BPS head Margo Yuwono said.

Indonesia's state-owned oil and gas company Pertamina also raised the price of its high-octane gasoline product, named Pertamax, by 40 per cent starting on Friday.

Indonesia's Coordinating Minister for Maritime and Investment Affairs Luhut Binsar Pandjaitan said recently that the government might soon raise the price of the three-kilogram liquefied petroleum gas (LPG) canisters, the most popular brand used by the people in the country.

Economic and energy observer Fahmy Radhi from Gadjah Mada University warned the government that the plan to raise the LPG price could create panic buying from the public.

Margo Yuwono said that inflation would likely be higher in April due to several reasons that are related to each other such as a surge in global commodity prices amid the Ukraine crisis, high demands in many goods amid easing Covid-19 curbs, high demands in staple foods during the holy month of Ramadan ahead of Eid al-Fitr holiday, and the government's policy to raise the value-added tax from 10 percent to 11 percent which took effect on Friday.

President Joko Widodo told his ministers to monitor the soaring domestic prices and to convey the policy changes more clearly to the public, including any plans related to raising prices of other commodities.

Deputy Governor of Bank Indonesia Dody Budi Waluyo was confident that until the end of the year, the inflation will remain between 2 percent and 4 percent.

Economic expert Yusuf Rendy from the Jakarta-based think tank Center of Reform on Economics (Core) said that higher prices and inflation would burden the middle-lower class of people and weaken their purchasing power.

"For the middle-upper class, the inflation may not bring significant impact, but the middle-lower class would suffer, given that their economic situations haven't yet fully recovered," Rendy noted.

He suggested that the government distribute more aid to the people and take more subsidy policies to support the purchasing power of the middle-lower class. - Xinhua

 

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