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Keep inflation low: Jokowi
President Joko âJokowiâ Widodo gave assurances on Wednesday that the government and the central bank would work together to keep inflation in check despite the surge in inflationary pressures in recent weeks
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President Joko 'Jokowi' Widodo gave assurances on Wednesday that the government and the central bank would work together to keep inflation in check despite the surge in inflationary pressures in recent weeks.
The inflation rate should be kept within the government's target of 4 percent, plus-or-minus 1 percent, through 2016, the President said at a press conference after the opening of the national meeting of the 2015 Regional Inflation Controlling Team (TPID).
This year's inflation target is far lower than the 8.4 percent recorded last year, and the government is optimistic that the target is achievable.
At the event, Jokowi said that any effort to ease inflationary pressure should not frustrate the government's aim to achieve 5.7 percent economic growth this year. The government's efforts to achieve the gross domestic product (GDP) target, meanwhile, should not come at the expense of missing the inflation target, he added.
'This year's inflation target should be achieved through a cooperation between central and regional administrations in monitoring the condition of supply, distribution, as well as prices on a daily and weekly basis,' President Jokowi announced.
Jokowi said that after maintaining a stable inflation rate at or below 5 percent through 2017, Indonesia should reduce the rate to between 3.5 percent and 4.5 percent in 2018, which is the average rate of inflation among ASEAN member countries.
As the largest country in Southeast Asia, Indonesia currently has the highest average annual rate of inflation. Malaysia has an inflation rate of 2.7 percent, while the Philippines has an inflation rate of 4.1 percent.
Indonesia's Central Statistics Agency (BPS) data show the inflation rate stood at 0.36 percent in April, pushing up the year-on-year (yoy) inflation to 6.79 percent, higher than the 6.38 percent rate recorded in March.
Meanwhile, a recent Bank Indonesia (BI) survey revealed that the inflation rate in the third week of May was projected to reach 0.4 percent month-to-month (mtm) or 7.4 percent yoy, higher than the 0.36 percent mtm or 6.79 yoy rate recorded in April.
'The inflation rate is increasing ahead of Ramadhan and Idul Fitri festivities, which will in turn produce more inflationary pressures. We should stay alert about monitoring food prices, especially on rice, chili peppers, onions, beef and chicken meat,' Juda Agung, the central bank's executive director in the economic and monetary policy department, said.
Jokowi added that the government would begin establishing commodity auctions in each region to create better supply and demand conditions, which in turn would stabilize prices, adding that 'currently the movements of staple food and commodity prices remain in the hands of middlemen'.
'The auction for commodities is one of the efforts to revamp the commerce conditions on the ground, so that our farmers can enjoy profit margins they gain from production,' Jokowi said, adding that better management by the State Logistics Agency (Bulog) would also help reduce the inflation rate over the longer term.
Coordinating Economic Minister Sofyan Djalil said commodity exchanges would be formed in regions that had been main producers for major commodities and staple foods.
The government will also focus its infrastructure developments on agriculture, prioritizing dams for irrigation, electricity, as well as connectivity-related projects in marine areas to reduce logistic costs, Jokowi said.
Bank Central Asia (BCA) economist David Sumual told The Jakarta Post that the government's inflation target this year was feasible based on his team's calculation. 'The rate will ease during the final months of the year, while a 3 percent rate can only be achieved in 2018 or 2019 if infrastructure developments are improved.'
'The plan to establish commodity auctions in regions will help central and regional administrations as well as Bulog in monitoring prices on the ground if it is done in a real-time online system. We will then have clearer data on real supply and demand,' David said.
