The Jakarta Post
Bank Indonesia (BI) expects the January inflation rate to remain low, despite an increase in food prices as a result of major flooding in many parts of the country.
BI Governor Perry Warjiyo estimated a 0.41 percent month-to-month (mtm) increase in the January inflation, "the lowest level since 2016”, he said on Jan. 10 in Jakarta. He added that annual inflation in 2020 was projected to remain low at 3 percent, slightly above the 2019 inflation rate of 2.72 percent.
The 2019 inflation rate is the lowest in two decades and falls within the central bank's targeted inflation rate of 2.5 to 4.5 percent. Statistics Indonesia head Suhariyanto attributed the low annual inflation to the government’s policies, which helped to control prices.
Perry acknowledged that widespread flooding early this month would increase the prices of some foods, such as chilies and onions, but that the hike would not significantly impact the inflation rate because of a decline in the prices of other commodities.
However, economist Bhima Yudhistira Adhinegara of the Institute for Development of Economics and Finance (Indef) said that low household spending could be the cause of the low inflation rate.
“The middle and upper classes that constitute 85 percent of household spending in the country are holding on to their money and saving it,” he said.
Bhima also cautioned the government to stay alert over sharp increases in administered prices that might reduce consumer buying power., such as the health insurance premiums of the Health Care and Social Security Agency (BPJS Kesehatan).
He added that the government should also keep a close eye on developments in US-Iran tensions that could cause world oil prices to spike and in turn, increase fuel prices in Indonesia. (mfp)