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View all search resultsAll good on the macro front
Economists have warned of climbing inflation as soon as this month, as more of the global price pressure caused by the Middle East conflict is passed on to domestic consumers.
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A fuel price board is displayed at a gas station on Jl. Jenderal Basuki Rachmat in East Jakarta, in this file photo. (JP/Iqro Rinaldi)
G
DP growth has exceeded expectations and inflation is smack in the middle of where Bank Indonesia needs it to be, we are doing well for ourselves, it seems.
While the world frets over costly energy pushing consumer prices up and economic output down, two of the most closely watched indicators suggest Indonesia might just be an archipelago of bliss. A close look, however, shows that the strong macroeconomic data is partly owed to direct government intervention.
There is nothing wrong with that per se, but it is important to keep in mind, lest we be shocked when the bill arrives.
Helping the economy through hard times is the government’s job, most economists would argue, except for the most fervent free-market believers, who in any case have long fled the scene, both in this country and elsewhere.
GDP growth would have been weaker than the 5.6 percent reported for the first quarter, had it not been for the massive increase in government spending, up almost 22 percent year-on-year (yoy), albeit from a particularly low level in the comparison period.
Inflation would have been higher than the 2.4 percent posted for April, had it not been for the government’s decision to keep subsidized fuel and electricity prices unchanged despite skyrocketing global energy prices, while delaying adjustments to fixed gasoline and diesel prices, in effect subsidizing the so-called nonsubsidized fuel prices through state-owned oil and gas firm Pertamina.
Consumer spending was the key driver of growth, Statistics Indonesia reported, and that too was owed in part to state support, namely in the form of tax discounts, social aid and Ramadan bonuses, which the government also compelled ride hailing providers to extend to their driver partners.
