After experiencing deflation in March, largely as a result of the harvest season, Indonesia could soon face the opposite effect, as a recent increase in the prices of commodities could lead to inflation, economists have predicted.

The country recorded a monthly inflation rate of 0.09 percent in April as a result of the increase in commodity prices, bringing annual inflation to 4.17 percent year-on-year (yoy), the Central Statistics Agency (BPS) announced on Tuesday.

The April inflation rate was far lower than that in January and February when the rate reached 0.97 percent and 0.23 percent, respectively.

However, according to economist predictions, the inflation rate in April indicates that prices could start to rise again following the 0.02 percent deflation rate in March, even with some regions experiencing an oversupply in goods as a result of the harvest season.

To avoid a major spike in prices next month due to rising demand during the fasting month of Ramadhan, the government is looking to better manage the country’s food supply and distribution strategy. However, avoiding the price hike could be challenging, the BPS and economists have suggested.

“The solution of course would be to ensure an adequate food stockpile before Ramadhan. At the very least, that is what the government can control,” said Bhima Y. Adhinegara, an economist with the Institute for Development of Economics and Finance (INDEF).

Any uptick in food inflation would easily push the annual inflation rate toward the range of 4.5 percent to 5 percent, an economist of Singapore-based DBS Bank, Gundy Cahyadi, said recently.

“We reckon there is a big chance for the CPI [consumer price index] to top the 5 percent mark by year-end,” he said.

The rising CPI in April can be attributed to administered prices, particularly in electricity and fuel, as well as a number of food commodities such as garlic, chicken, tomatoes and djenkol (dogfruit).

Meanwhile, price decreases in the last month were seen in major food commodities such as red and green chili, rice, sugar, beef and chicken eggs.

Rising prices in transportation, housing and utilities are also expected to accelerate inflationary pressures as their costs are closely tied to global oil prices, which are prone to inflation.

The BPS has warned of inflationary pressures in administered prices in June as an after-effect of an increase in electricity prices for 900 volt-ampere (VA) consumers.

Even though the increase, the third electricity price hike this year following increases in January and March, will occur in May, the impact will only be felt in June since most 900 VA users are post-paid subscribers, BPS head Suhariyanto said.

Bank Indonesia (BI) has maintained its inflation target range of 3 to 5 percent this year as it is convinced inflation can be managed despite the expected increase in administered prices from electricity that will linger until at least June, the central bank’s executive director for monetary and economic policy, Dody Budi Waluyo, said recently.

Although the inflationary pressure looms, the central bank still expects to hold its benchmark interest rate at 4.75 percent during its Board of Governors meetings in the next two weeks due to manageable currency volatility following continuous capital inflows.

Pinning hopes on stronger foreign reserves and manageable inflation, the central bank expects to have sufficient ammunition to counter the shocks from volatility in the rupiah exchange as the Federal Open Market Committee (FOMC) meeting in the United States on Wednesday will determine whether the Federal Reserve will raise its rate again after a 25 basis points increase to 1 percent in March.

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