GOVERNMENT SHOULD CONTROL FOOD PRICES TO KEEP INFLATION LOW

By Andi Abdussalam

Jakarta, Feb 3 (Antara) - The government needs to control the prices of volatile food items to keep inflation low based on its set target range of 2.5-4.5 percent in 2018.          After having successfully lowered the country's 2017 inflation rate to 3.61 percent, or below its target of 4.3 percent, the government is determined to keep this year's inflation rate within the 2.5-4.5 percent range.          According to Finance Minister Sri Mulyani Indrawati, the government was able to lower the inflation rate in 2017 to below its predicted figure owing to its efforts to control the fluctuations in the prices of volatile food items.          Hence, the government should continue to control food price volatility to keep the inflation rate low this year. This holds significance, as food items had contributed 2.34 percent to the January 2018 inflation. The Central Bureau of Statistics (BPS) had recorded that inflation in January 2018 was 0.62 percent, bringing the year-on-year inflation to 3.25 percent.          "Rice was the biggest contributor to January's inflation, adding 0.24 percent to the inflation," BPS Chief Suhariyanto noted at a press conference in Jakarta on Thursday (Feb 1).          The other food items that contributed to the inflation were purebred chicken meat, at 0.07 percent; fresh fish, 0.05 percent; bird eye's chili, 0.04 percent; and red chili, 0.03 percent, he noted.

GOVERNMENT TO FIX CEILING PRICE TO CURB INFLATION

by Andi Abdussalam

Jakarta, April 3 (Antara) - Rise in demand for basic commodities usually triggers inflation during the fasting month, which this year is expected to start by the fourth week of May.          The government, through the Ministry of Trade, will impose a fixed ceiling price (HET) due to an increase in price, particularly of food commodities that are prone to volatile prices.          The Ministry of Trade had earlier revealed its plan to impose HET for food commodities, such as sugar, frozen meat, and non-packaged cooking oil, with effect from April 10, 2017.          The three food commodities have a relatively high contribution to the inflation rate. Hence, the Ministry of Trade has accorded them priority in its plan to impose HET.          According to the central bank, Bank Indonesia (BI), the government should take control of the inflation derived from the volatile food commodities, so that it would achieve its annual inflation target at 3 to 5 percent for 2017.          "The problem of inflation always arises from the food sector. Food inflation always records a rate of 5 to 10 percent. This year, we have curbed food inflation at the 3 to 5 percent rate," Dody Budi Waluyo, BI's head for Monetary and Economic Policy Department, noted in Jakarta on Friday (March 31).

CORE INFLATION TREND AFFIRMS INDONESIA'S CURRENT ECONOMIC STABILITY

by Andi Abdussalam

Jakarta, Aug 4 (Antara) -- As announced by the Central Bureau of Statistics (BPS) on Monday, August 3, the inflation trend indicates that Indonesia's current economic conditions are stable.          Although the July 2015 inflation rate increased to 0.93 percent month-to-month (mtm) from 0.54 percent mtm in June, core inflation declined.          Core inflation dropped to 4.86 percent year-on-year (yoy) in July from 5.04 percent in June.         "Core inflation dropped to 4.86 percent from 5 percent three months ago. This means that on the whole, economic components developed positively and well," BPS Chief Suryamin said while announcing the latest developments in the inflation rate of the country, on Monday.           Core inflation in July was recorded at 0.34 percent mtm and 4.86 percent yoy. This is an indicator of stable economic conditions.

GOVT MAINTAINS INFLATION AT FAVORABLE LEVEL

By Andi Abdussalam

Jakarta, Aug 1 (Antara) - The government has been able to keep in check the country's inflation rates over the past months.         This is indicated by the July 2015 inflation rate of 0.8 percent, lower than the average rate of 0.86 percent recorded every July over the past five years.         Governor of Bank Indonesia (BI), the central bank, Agus Martowardojo, said on Friday that compared with the average 0.86 percent month-to-month (mtm) July inflation rate over the past five years, the inflation rate in July 2015 showed that the government had been able to curb the inflation rate.         "We have previously predicted that the mtm July 2015 inflation would be at 1.12 percent. But it turned out to be lower than that. This shows an improved condition," the Indonesian central bank governor noted.         BI officials expected that the July 2015 inflation rate would be lower than 0.8 percent, yet this level is relatively good and indicated the government¿s success in keeping inflation in check.

BI, GOVERNMENT COOPERATE TO CURB INFLATION

By Andi Abdussalam

Jakarta, June 28 (Antara) - Indonesia recorded a high inflation rate in May 2015, reaching 0.5 percent, the highest monthly inflation over the past seven years, or 5.17 percent year-on-year.          In an effort to bring down the inflation rate, the central bank, Bank Indonesia (BI), is set to cooperate with the government to lower the inflation rate during the current holy fasting month of Ramadan.          "To reduce and control inflation during Ramadan, we need to coordinate with the government," BI Deputy Governor Erwin Rijanto said.          For this purpose, BI has decided to maintain its reference rate at 7.5 percent for the fourth consecutive occasion to curb inflation, maintain macroeconomic stability and improve current account deficit after it reduced the rate by 25 basis points in February.          The central bank's board of directors also decided to maintain the deposit facility rate at 5.5 percent and lending facility rate at 8.0 percent.

GOVERNMENT TAKING STEPS TO CURB INFLATION DURING RAMADAN

By Andi Abdussalam

Jakarta, June 23 (Antara) - The high demand for food products during the current Muslim fasting month of Ramadan is forecast to boost inflation, which in May was the highest ever recorded in the month over the past seven years.          In the face of this, the government and Indonesia's central bank Bank Indonesia (BI) are cooperating by taking efforts to bring down the inflation rate in the current Ramadan fasting month, which lasts from June 18 to July 16, 2015.          "To reduce and control inflation during Ramadan, we need to coordinate with the government," BI Deputy Governor Erwin Rijanto stated.          The Central Bureau of Statistics (BPS) had noted that Indonesia's inflation was 0.5 percent in May, the highest monthly inflation in seven years. Rise in the prices of food products contributed to the inflation in May, BPS Chief Suryamin affirmed.          Rijanto believes that the system of logistics distribution posed a major obstacle that led to a rise in the prices of goods in several regions.          "Distribution is crucial. We have to discuss with the government about the areas of concern in the logistics distribution system," he emphasized.

GOVERNMENT TO CURB INFLATION CAUSED BY FUEL PRICE HIKE

By Andi Abdussalam
Jakarta, Nov 27 (Antara) - The government and the country's central bank, Bank Indonesia (BI) will take all necessary steps to ensure that the inflation rate stays between 7.3 and 7.7 percent after the recent hike in subsidized fuel prices.          "We forecast that the inflation rate will hover between 7.7 and 8.1 percent. Of course, we are doing our best to achieve an inflation rate of 7.7 percent," BI Governor Agus Martowardojo stated on Wednesday.          The BI governor has forecast that the inflation rate in November will soar as a result of the hike in the prices of subsidized fuels, and in December, it will increase by 2.0 percent.          The BI's inflation estimate of 7.7-8.1 percent in 2014 is higher than the government's projection of 7.3 percent as the subsidized fuel price hikes are expected to contribute 2.4-2.8 percent to the inflation rate.          Some 1.3 percent of the estimated 2.6 percent is a direct contribution due to the increase in the prices of subsidized fuel oils, while some 0.7 percent is an indirect contribution in the form of increased transportation cost and 0.6 percent is a result of the food, services, and goods price hikes, he stated.          Finance Minister Bambang Brodjonegoro is content with the government's efforts to curb the inflation rate at 7.3 percent, in spite of the several higher projections.          "In essence, we are resolved to control inflation, so that it would be in the range between 7.3 percent and 7.5 percent at the end of the year," the finance minister noted.          He explained that while making the projection, the government has taken into account the impact of fuel oil price hikes, which are expected to contribute 2.0 percent to the inflation. It has also taken into consideration the inflation assumption set in the revised 2014 state budget at 5.3 percent.

POLICY MIX NEEDED TO CONTROL INFLATION

By Andi Abdussalam

Jakarta, Sept 20 (Antara) - President-elect Joko Widodo, who will be installed on October 20, has said his government will increase the prices of subsidized fuel to bring down the quantum of subsidy burdening the state budget.          Observers predict that fuel price hike will trigger inflation, otherwise supposed to stay this year in the range of 4.5 plus minus one percent.          Bank Indonesia (BI), the Indonesian central bank, however said that it was not worried by the effect of any possible rise in inflation.          "No need for too much concern (over this). It would be only a short term effect. In two or three months, conditions would be back to normal again," BI Governor Agus Martowardojo said.          Agus said the government needs to raise the prices of subsidized fuels to keep the vital fiscal stats in a healthy condition. "Price adjustment is needed, considering the fiscal condition," he added.          Bank Indonesia hoped that the prices of subsidized fuels would be raised before the US central bank, the Fed, begins to raise its interest rate, he said. The Fed Fund rate is expected to be raised in mid 2015.      Bank Indonesia will implement a stringent monetary policy by the end of 2014 to achieve the inflation target, improve the current account deficit, and will try to anticipate the impact of the global economic policies.

GOVT URGED TO CURB INFLATION

By Andi Abdussalam

Jakarta, Aug 4 (Antara) - The government must intervene to control rising commodity prices that have caused sky-rocketing inflation and weakened the purchasing power of people in middle and lower income brackets, according to officials of local advocacy groups.          "We call  on the government to help overcome increasing basic necessity prices that have boosted inflation to reach eight percent, exceeding the government's target at 7.2  percent," Said Iqbal, secretary general of the Social Security Action Committee (KAJS),  recently said.          The Central Bureau of Statistics (BPS) has reported that Indonesia's inflation rate rose by more than expected in July to 3.29 percent, bringing year-on-year (yoy) inflation to 8.61 percent.          According to the Bank Indonesia (BI/the central bank), the higher-than-expected inflation rate was chiefly caused by disruptions in the supplies of commodities such as onions, red chili, chicken meat and beef, amidst rising demand during the fasting month of Ramadan.

GOVT TO STUDY TRIGGERS OF FEBRUARY INFLATION

By Andi Abdussalam

Jakarta, March 3 (Antara) - The country's high inflation rate last February, the highest one in the same month over the past ten years, surprised the government.          Recorded at 0.75 percent, the February inflation is far higher than the government's estimate at between 0.3 and 0.4 percent.          "I have predicted that inflation would be high because it was usually high in the months of January and February. But the inflation rate last February was beyond expectation, reaching 0.75 percent." Chief economic minister Hatta Rajasa said.          The Central Bureau of Statistics (BPS) has announced that the inflation in February was the highest one ever recorded in the same month over the past ten years. It reached 0,75 percent.      "The inflation in February was the highest in the last ten years," BPS  Suryamin said.          Hatta Rajasa said on Sunday that the government will discuss and study what had became the trigger of the inflation.      "Usually, the inflation is high in January and February, not because it is not under control but because it has been a fact that inflation is always high during that period, usually due to the volatility of food prices. This time, however, the inflation is beyond expectation," Hatta said.

PROPOSED POWER RATE HIKE COULD LEAD TO HIGH INFLATION

  By Andi Abdussalam

         Jakarta, Sept 5 (ANTARA) - The Indonesian government is hoping that the country's economic growth rate, which continues to remain strong in spite of the global economic recession and the lack of economic growth in Europe, is not floored by an increase in the rate of inflation, which could lead to the economy overheating.

        It is feared that the government's plan to raise basic electricity tariffs by 15 percent next year could generate a year-on-year inflation rate of 5.1 percent. Moreover, the August inflation rate of 0.95 percent is already higher than the government's earlier expectation of between 0.7 and 0.8 percent.

        As a result, the country¿s central bank, Bank Indonesia (BI) plans to examine the impact that the basic power rate hikes could have next year.

        However, the Finance Minister pointed out that at present the Indonesian economy is not experiencing overheating, and that relatively high economic growth is likely to be followed by a manageable inflation rate.

       "I do not agree with the opinion that the Indonesian economy is overheating," Finance Minister Agus Martowardojo said on Tuesday.

        He pointed out that economic overheating can only take place if there is fast economic growth, which is accompanied by a high inflation rate. Indonesia is not facing such economic conditions, the finance minister asserted.

         "Europe is experiencing negative economic growth or recession. But, the Indonesian economy grew by 6.3 percent in the first quarter and 6.4 percent in the second quarter, and the rate of inflation is still under control, as it is still less than five percent," Martowardojo pointed out.

         Credit expansion by 26 percent per annum has also been recorded and it is expected to continue increasing, which will boost investment and raise working capital.

         "The minister also noted that imports of capital goods generated an investment growth of 28 percent in the first semester of this year.

        "We are in the process of raising credit expansion further, and will keep track that it is only used for productive purposes. Credit extended for investment and working capital will also be monitored," Martowardojo stated.

        He added that while other countries are struggling to boost their economic growth, the growth of investment in Indonesia has remained relatively good. Over the past three months Indonesia has imported a lot of fuel oils and capital goods, which are needed for advancing investment.

         However, Martowardojo admitted that a high trade deficit is not good for the current account balance, but appreciated the decline in the country's trade deficit registered in July this year.

         "We had a trade deficit of US $1.32 billion in June, which was cut by US $176.5 million in July. We are grateful for this reduction and it is evident of the efforts made by the Indonesian government to keep its current account balance sound," the finance minister added.

        Besides, the government is continuing to monitor the uncertain global economic conditions, and keeping a tab on its macro-economic indicators so that Indonesia is able to avoid being directly impacted by the European economic crisis.

        "If any economic turmoil takes place, it will become difficult for the government to take a decision and plan ahead. So the government is continually paying attention to the inflation and currency exchange rates, to ensure that the economy functions smoothly, even if there are temporary fluctuations," Martowardojo stated.

         Positive economic indicators, including the country's current foreign exchange reserves being pegged at US $108 billion, are bound to keep the Indonesian economy from overheating, he said.

        "This also shows that we are in complete control of our economy and not overheating," the minister said.

         But the government's plan to raise electricity tariffs by 15 percent is still expected to boost inflation by 5.1 percent.

         While the central bank studies the impact this move will have on inflation, power rates are estimated to automatically appreciate on a quarterly basis till they touch 15 percent by the end of 2013.

         "I will have to assess this measure¿s direct and indirect effects to begin with," Bank Indonesia Governor Darmin Nasution stated on Tuesday.

         The government announced recently in the 2013's draft stage budget that it is proposing to the Parliament an automatic hike in power rates of about 3 percent to 4 percent for each quarter next year, so that by the end of 2013 the cumulative electricity tariff increase touches 12 percent to 15 percent.

         Nasution pointed out that he was still unsure about the level of inflation this rate hike could create. Therefore, the central bank will study it and assess the impact it is likely to create.

        Meanwhile, Perry Warjiyo, the director of economic research and monetary affairs at BI, said Bank Indonesia has predicted that the inflation rate will jump to 5.1 percent if the government goes ahead with the increased power rate, as this will immediately result in a spike in inflation by 0.3 percent.

        He added that initially BI had predicted 2013's inflation rate at 4.8 percent, but the boost in electricity tariffs will augment it further to 5.1 percent.

         Warjiyo stated that the policy to raise electricity tariffs is still a proposal and has not been deliberated upon by the House of Representatives (DPR), so that its realization is still uncertain.

        "The proposal is still part of the draft state budget. It can only be implemented as a law if the state budget for 2013 is approved by the House," he said.

         Finance Minister Martowardojo said that the proposal of hiking electricity tariffs is aimed at slashing government subsidies, which now amount to Rp316 trillion. The reduction in power subsidies is expected to help finance infrastructure development. Around Rp100 trillion will be allocated for the electricity sector, while the rest will be used for fuel oils.

         He added that supplementary funds of around Rp12 trillion can be raised every year for infrastructure projects, through the proposed hike in electricity tariffs.

         "Assuming that the electricity tariff is raised by 3 percent to 4 percent every quarter starting January 2013, the government can have at its disposal extra developmental funds of around Rp12 trillion a year."
     The current allocation for infrastructure in the draft state budget of 2013 has been set at Rp190 trillion.

        State-owned power firm PLN in its capacity as the operator of the national electricity business also said it hopes that the government's plan to boost power rates, which is aimed at increasing investment and expanding power supply coverage nationally, is realized soon.***2***
(T.A014/INE/KR-BSR/F001) 05-09-2012 15:41:5

GOVT UPBEAT OVER DECLINING INFLATION

By Andi Abdussalam

Jakarta, May 17 (ANTARA) - The inflation rate for Indonesia in 2011 was recorded at about 3.8 percent, which was far below the government's target of 5.65 percent.          This has made the government more optimistic about keeping the country's inflation at a manageable level.          "In the past five years, the volatility of inflation has been relatively manageable. It could be even said the inflation is under control," President Susilo Bambang Yudhoyono said when opening a coordination meeting of the Regional Inflation Control Team (TPID) on Wednesday.          Even though the inflation in 2010 was recorded at 6.96 percent, well above the target of 5.3 percent, in the past five years it has been showing a downward trend. The inflation triggered by the volatility of food prices has dropped from 12 percent in 2007 to 7 percent in April 2012.          The decline in the consumer price index during the same period was also driven by a drop in the core inflation from 6 percent to 4.05 percent.          This year, the government had earlier set an inflation target of 5.3 percent but later revised it upwards to 6.8 percent in light of its plan to raise subsidised fuel oils in April. As the plan was postponed, the inflation could be curbed.          Finance Minister Agus Martowardojo has predicted the inflation rate may remain below 5.3 percent this year if the government cancels its plan to raise the price of subsidised fuel oil.          "The assumed inflation rate of 6.8 percent in the revised 2012 state budget already factors in a fuel price increase of Rp1,500 a litre. If the subsidised fuel price is not raised, the inflation rate may be below 5.3 percent," he said on the sidelines of the TPID coordination meeting.          The decline in the inflation rate is thanks to the efforts of regional inflation control teams, because provinces and districts constitute some 77 percent of the nation's inflation rate.          According to Bank Indonesia Governor Darmin Nasution, the regional inflation control teams have succeeded in keeping inflation and food prices at a low level.          The central bank governor stated the regional governments of provinces, districts, and municipalities played a crucial role in curbing inflation and maintaining price stability.          He noted the downward trend in inflation over the past five years, including the price index inflation, which dropped from 6 percent in 2007 to 4.05 percent in April 2012. The volatile food inflation also went down from 12 percent in 2007 to 7 percent at present.         "This is a performance that the country deserves to be proud of. It is inseparable from the roles played by the regional governments in curbing prices. The regional governments' roles in curbing inflation are important because inflation in the regions outside Jakarta makes up 77 percent of the national inflation rate," Darmin pointed out.          Meanwhile, President Yudhoyono called on the heads of regional governments to avoid bragging about their efforts to control prices and inflation, since it could be counterproductive and may adversely affect other regions as well as the economy at the national level.          "I have been leading the government for seven years. If we want to implement a local policy, we have to holistically look at its impact on other districts and provinces and on the nation's economy," the President stated.          He said the role of the regional government was important because inflation at the national level is the aggregate of regional inflation. "Thus, synergy and integrated efforts are needed to control prices," Yudhoyono added.          "In the past five years, the volatility of inflation has been relatively low. But the uncertain global economy, including the high prices of food and energy, requires Indonesia to always take a careful and measured step with support from the regional governments as well as businesses," he said.          The inflation rate is likely to remain at a manageable level, as the government believes the fiscal stability this year will not be disturbed even if the price of subsidised fuel were to be raised. That is because the revised 2012 state budget is quite sound and the government has adequate reserves to respond to any possible volatility.          According to Finance Minister Agus Martowardojo, the inflation in the coming three years is expected to be maintained a level below 5 percent. He revealed the inflation rate target of 3.5-5.5 percent for 2013 and 2014 and of 3-5 percent for 2015, which were set after consulting with Bank Indonesia.         "The gradually declining inflation rate targets are expected to give a clear picture of the government's and the central bank's commitment to keep the national inflation rate at 4 percent in the medium term," Agus said.***2*** (T.A014/INE     ) 17-05-2012 15:18:2

EXTREME WEATHER FEARED TO BOOST INFLATION

By Andi Abdussalam

Jakarta, Jan 27 (ANTARA) - The heaviest challenge the government is facing this year is to cover the impact of extreme weather and keep the inflation at a level not too high as a result of food price increases.          This year's extreme weather conditions have the potential of causing a drop in food production and all the negative consequences of such a development.          The House of Representatives (DPR) has reminded the government of the heaviest challenge it is facing in 2011, namely the challenge of keeping inflation under control.          House Speaker Marzuki Alie, in his opening remarks of the House's 2010-2011 Sitting Session recently said that the inflation rate in 2010 had reached 6.96 percent. He quoted data released by the Central Board of Statistics (BPS) early this month. The figure of 6.96 percent inflation based on the BPS data has far exceeded the inflation target set by the government at 5.3 percent for 2010.          "The increase in the prices of basic necessaries such as food and agricultural commodities is quite saddening," the House Speaker said.          After all,  extreme weather conditions can cause an increase in pests and plant diseases. "Then there may be harvest failures and a decline in food production," Husnannindity Nurdin, head of West Nusatenggara's  Food Resilience Agency (BKP) said.          Even, the People's Coalition for Fisheries Justice (Kiara) has asked the government to declare the current  extreme weather conditions a national disaster.          "There are 53 districts and cities in Indonesia which have been impacted by the present  extreme weather conditions and 550,000 people are being  victimized. Looking at the facts, we urge the government to declare present  extreme weather conditions a national disaster," Kiara Secretary General M Riza Damanik has said.          For this purpose, the government has prepared a set of polices to face extreme weather and possible drop of food production in 2011.  It is preparing  two presidential instructions (Inpres) to ensure food security in anticipation of  expected  extreme weather changes.           According to chief economic minister Hatta Rajasa  recently the drafts of the two presidential instructions  were being finalized and would hopefully be issued early in 2011. "We must increase food supply and that is why we need the presidential instructions," he said.          He said one of the instructions would give the agriculture minister flexibility in responding to problems caused by extreme changes in weather pattern, insect attacks or damage to agricultural lands.          Under the presidential instruction, the agriculture minister could issue policies to realize such things as earlier distribution of seeds or provision of contingency funds to anticipate production changes as a result of weather problems through price stabilization or other mechanisms.          Yet, inflation could not be expected to be at the targeted 5.3 percent, but about 6 percent this year, even if the weather conditions will relatively be improving.          Bank Indonesia (BI) Governor Darmin Nasution predicted the rate of inflation this year could be  around six percent if weather conditions improve to a level conducive for food production.          "If the US and European economies  improve and the weather is also improving while capital inflow still happens, the rate of inflation will still be around six percent," he said after dedicating a Bank Indonesia building in West Kalimantan on Wednesday.          He said if the weather conditions in the year to come were not as extreme as now the target of six percent inflation would be reached.          "But we cannot make the assumptions on whether until December the weather would be worse or there will even be a drought," he said.          Even if BI has predicted an inflation of about six percent this year, the government will strive to  keep the inflation rate at  5.3 percent as assumed in the  2011 State Budget.          "We are targeting 5.3 percent and we will coordinate with Bank Indonesia which is responsible for monetary control," Finance Minister Agus Martowardojo said.          The minister said the government would pay attention to inflation as investors' worries over inflation in 2010 that had once weakened the Indonesian Stock Exchange's composite price index to 3,400 points.          "Worries abroad are conditions in Europe, that Portugal and Ireland seem to need a bailout but we heard that European countries also  Japan were all committed to help. So it is the dynamics that we must be alert on," he said.          Right now, he said, the government would not as yet wish to change the macro-economic assumptions and indicators in the 2011 budget including the assumption on inflation.          "We are now concentrating on executions. We have not conducted re-forecasting but we will be alert," he said.          In the meantime, Bank Indonesia (BI) Deputy Governor Hartadi A Sarwono said the central bank would continuously monitor the developments in core inflation  before taking preventive measures in responding to high inflationary pressures.          "Bank Indonesia will not hesitate to raise the BI Rate if there are signs of a rise in core inflation, We do not like the rising inflationary pressures although they were caused by price increases in the food groups because it will affect core inflation," Sarwono said.      (T.A014/H-NG/f001) 27-01-2011 11:59:4

NEXT YEAR LIKELY TO SEE HIGH INFLATION

By Andi Abdussalam

Jakarta, Dec 18(ANTARA) - Economic observers have predicted that inflation in 2011 could reach up to 6-7 percent, which is far higher than  the government's and Bank Indonesia (BI/the central bank)'s previous assumptions at 5.3 percent.          They based their predictions on various possibilities, including policies the government is likely to introduce in 2011 such as sn increases in fuel oil prices, the basic power rate  and the threat of global crisis.          "The economic growth target of 6.4 percent is likely to be achieved but we are not  sure about the inflation target. In  a pessimistic scenario . inflation in 2011 could reach 7 percent," A. Prasetyantoko, economic analyst of  Atmajaya Catholic University, told a seminar on monetary policy on Thursday.          Prasetyantoko said inflation could be estimated at seven percent if the world oil price did not increase.  "The story will be different if the world crude rises to US$100 per barrel," he said.          He said that the seven percent inflation estimate had not yet included consideration of possible increase in world crude price from US$80 per barrel.          A moderate estimate was made by economic observer A Tony Prasetiantono who put the figure for 2011 inflation at 6 percent. "I predict the inflation rate next year at about six percent,"  Tony Prasetiantono told a seminar on Indonesia's economic outlook 2011.          He said that Indonesia at present was still facing three big problems, namely currency wars, global financial crisis and bad infrastructure conditions.          Tony, who is head of the Economic and Public Police Study Center of the University of Gadjah Mada, said that an increase in electricity tariff rate and fuel oils as well as global crisis would have impact on Indonesia's economy and boost inflation.          However, the inflation in that rate is still classified as reasonable and would not badly disrupt the country's economy. This is because the rupiah exchange rate is inclined to be stable.          Although it will be facing internal and external constraints in 2011, Indonesia will still likely be strong to face it as it still has stable and strong domestic currency exchange value.          "I predict that the rupiah exchange rate against the US currency in 2011 would be at a range between 9.000 and 9.200 rupiah per dollar. Economic growth and inflation rates will respectively at 6.3 percent and 6 percent respectively," he said.           Yet, according to Prasetyantoko, inflation can even exceed 7 percent. He said inflation would pose a challenge for the management of Indonesian economy in 2011.          The government's plan to limit subsidized fuel oil consumption in March 2011 will drive up fuel oil prices. In addition, increases in world crude prices and climate change issues are likely to generate inflation and food prices.          "This all will create inflationary pressures. If conditions worsen inflation can reach over 7 percent," Prasetiyantoko said.          He said that so far there were no indications whether global economic conditions would be improving or not.          "If economic conditions in Europe and the United States are improving there is the possibility of capital outflows from Indonesia that would influence inflation in the country," Prasetyantoko said.           Legislator Aziz Syamsuddin of the Golkar Party shared Prasetyantoko argument that limitation of fuel oil consumption will also trigger inflationary pressures and has a great impact on the economy because of the burden it will create for large segments of middle class society.           "The government should be really careful with its policy to scrap its fuel oil subsidy because it will affect the people's interest and has a direct impact on them,"  Aziz Syamsuddin, a member of the House  of Representatives said.           He said the plan to restrict the use of subsidized fuel would affect the prices of basic commodities.  These goods reach markets through a transportation process mainly involving vehicles running on fuel oil. If transport operators have to pay higher fuel prices, transportation costs will automatically rise and so will the commodities' prices.          "Means of transportation for commodity is usually privately owned, the segment that isn't included in the subsidized vehicle category," Syamsuddin.          He added an increase in transportation cost will automatically  create an extra financial burden for the people  as basic prices move up whereas their income remains stagnant. "Really difficult situations may emerge from this fact. So, the government needs to be very careful in this regard," he added.          In the meantime, BI also predicts that inflationary pressure in 2010 will continue to take place in 2011 but it will not exceed the 6 percent level.  "The inflationary pressure would continue in 2011 from the beginning of the year but it would not exceed 6.0 percent," BI Governor Darmin Nasution.          Nasution said that next year's inflation would not reach 6 percent as far as there was no extraordinary event that would trigger inflation. For this year, BI has since the beginning predicted that the inflation in 2010 would slightly above 6 percent.           This is because in July 2010 a number of cases had boosted the inflation such as the increase in the basic electricity tariff and bad weather that caused agricultural product to weaken.          However, Darmin refused to mention the exact level of the inflation rate in 2011. In BI's assumptions, inflation was set at 6.5 percent for 2010 and 5.3 percent for 2011.      (T.A014/A/HAJM/14:15/f001)

PRICE HIKES EXPECTED TO HAVE LITTLE EFFECT ON INFLATION TARGET

By Andi Abdussalam

Jakarta, June 26 (ANTARA) - Prices of consumer goods in several parts of the country have begun to rise in the face of the government's plan to raise the  basic electricity tariff (TDL) by an average of 10 percent early July but the upward price trend is unlikely to affect this year's inflation rate forecast of  5, plus and minus 1, percent.          "It will have no significant impact on the inflation rate," Bank Indonesia (BI) Deputy Governor S. Budi Rochadi said. He predicted the planned electricity tariff hike effective early July will have little effect on the inflation rate so that the on-year inflation rate was likely to match the bank's forecast of 5, plus and minus 1, percent in 2010.           The BI deputy governor said that as the power tariff hike was only to apply to customers with an installed capacity of more than 900 VA, the inflation rate would likely  increase by 0.2 percent.           So, the country's inflation this year is expected to remain at previously predicted level of 5 percent, even though there will be a post-fasting month and year-end festivities during which prices usually soar.          "The inflation rate forecast of 5 percent  already includes the planned electricity tariff hike," Perry Warjiyo, BI's director of economic research and monetary policies, said meanwhile.          He said the inflation target for 2010 remained unchanged despite  inflationary pressure in May caused by non-fundamental factors including volatile prices in the food sector.  "The inflationary pressure at the start of this year was caused by  the rising prices of rice and in May by the rising prices of food seasonings such as red chili, and garlic," he said.          The Central Bureau of Statistics (BPS) said early this month the on-month inflation rate in May reached 0.29 percent, bringing the year-on-year inflation rate to 4.16 percent.          "One of the factors pushing up the May inflation was the rising price of garlic. Much of the national need for garlic is supplied by China. Because of tight import policy the price of garlic rose and  affected inflation," he said.          Given the slight inflationary pressure, the on-year inflation would match the bank's forecast of 5, plus and minus 1, percent, he said.          Bank Indonesia's prediction is almost the same as that made by the World Bank. The World Bank has predicted that Indonesia's  inflation rate in 2010 will reach 5.1 percent despite an expected surge in consumer prices in the second semester.          "The unexpected bearishness  in the first semester in 2010 and volatile  food prices have caused a lowering of the annual projection of inflation," World Bank's lead economist Shubhan Chaudhuri said.          He said the House of Representative's (DPR) approval of a 10- percent hike in electricity prices seemed to cause only a slight  impact on inflation and was an initial step in connecting the regulated price of energy with the economic cost of the energy.          "The electricity price hike will have a small impact, just one- or two-tenths of a percent on inflation," he said.           He said the biggest electricity price hike would be borne by commercial and rich customers while the price for household consumers would not change meaning the hike would only have  a small direct impact on the Consumer Price Index.            In 2011, however, inflation was predicted to be higher because of a rise in commodity prices, the weakening of the depreciation of the rate of exchange to a lower level, initial adjustment to the 10 percent electricity hike, projection of speedy money and credit growth and increased demand.           "The recovery in stages of economic activity is absorbing the capacity that has not been used and speedy credit expansion will spur demand-pull inflation as of early 2011," Shubham said.          The higher than expected world demand for raw materials, metals and oil that have caused an increased revision of indices of world commodity prices would cause higher cost of distribution for business players through consumer goods as of early 2011.          "This is what has made inflation forecasts for 2011 to rise to 6.3 percent from initially 6.0 percent," Shubham said.          This would cause BI to raise its benchmark rate. This year alone BI is predicted to increase its key rate at about 0.25 - 0.25 percent.          According to PT OCBC NISP chief commissioner Pramkti Surjaudaja, the government's plan to increase the basic power rates and the fuel oil prices will push up the inflation rate, and cause BI's key reference rate to be raised by 0.25 to 0.50 percent.          The 10-percent increase in the electricity tariff for middle and upper class consumers  will lead Bank Indonesia to increase its benchmark rate by about 0.25 percent to 0.50 percent by the end of this year.          Therefore,  Vice President Boediono has asked for continued monitoring of the inflation rate in 2010 ahead of the Muslim fasting month. After all, financial crisis in Europe could escalate and affect the country's economy.          "The rate of inflation must be closely watched moreover now following a financial crisis in Europe and ahead of the fasting month," his spokesman, Yopie Hidayat, said quoting him to newsmen recently.      (T.A014/A/HAJM/14:04/f001) 26-06-2010 14:09:1

GOVT HOPES RICE PRICE INCREASE WILL NOT RAISE INFLATION

by Andi Abdussalam
 

          Jakarta, Jan 27 (ANTARA) - The government hopes that the current price increases of rice in various parts of the country would not boost inflation, expressing its optimism that the annual inflation in January would still be below 3.0 percent.

         Of late, rice prices in various regions have been showing an upward trend. According to Agriculture Minister Suswono, Indonesian food supply is basically still secure in early stages of 2010.

         Indicators show that the December-January period is usually a critical period for Indonesian food supply with only an average of 2,000 tons of rice stock in the Cipinang main rice market in Jakarta.

         For the whole year 2010, however, the country's rice production target is expected to be met with a surplus of more than three million tons.

        "The target of 66 million tons of unhusked rice or more than 35 million tons of rice could hopefully be achieved in 2010 considering Indonesian success in 2009, where there was a 3 million tons of rice surplus,"  Suswono said in Padang on Sunday.

         Thus, the government hopes that the current increase in rice prices would not last too long so that inflation would remain at the targeted level this year. Finance Minister Sri Mulynai Indrawati has earlier predicted that inflation this year is expected to reach 5.0 percent. The inflation rate in 2010 would reach five percent, plus or minus one percent.

         Last month, Planning Director of the National Development Planning Board (Bappenas) Bambang Prijambodo predicted that  commodity prices would increase in 2010 and would likely  raise the inflation rate from about three percent in 2009 to about five percent this year.

         "The prices of two commodities, namely energy and raw materials, may pose a threat to the country's inflation in 2010," he said recently.

         He said that inflationary pressures would begin to be felt in January 2010 and by June the year-on-year inflation rates would likely be recorded at 5 to 5.6 percent. For the energy sector, pressures would come from non-subsidized fuel oils.

         Currently, rice prices have been showing an upward trend but Finance Minister Sri Mulyani Indrawati expressed her optimism that inflation in January would remain under  control, calling however, for a continuous watch on the rice price hike.

        "We have seen the price movements and it seems only the price of rice that has to be continuously monitored," she said on Tuesday.

         She admitted that the contribution of rice price in the inflation was still quite big, adding that the price of other commodities remained stable.  "The contribution of rice price to inflation is still quite big. Other than that I think it all remains stable," she said.

         The minister was also optimistic the annual inflation in January this year would still be below 3.0 percent.  "Annually, it is probably still below 3.0 percent," she said.

         The central bank's senior deputy governor, Darmin Nasution, earlier said the rate of inflation in the past two weeks was higher than normally it was. "Actually, in the past two weeks it is a bit higher than it is normally," he said.

         Danareksa Institute economist, Purbaya Yudhi Setiawan, meanwhile predicted the rate of inflation in January 2010 would reach 0.6 percent with the rice price hike being its main contributor.

         Thus, the rate of inflation in January 2010 would be higher than it was before due to the rice price hike. The rate of inflation in December 2009 reached 0.33 percent. The price of rice is affected much by the harvest season. If the harvest is late the price will rise, he said.

         In order to curb the inflation, the government is mulling nationwide market operations to stabilize rice prices which have steadily increased in several parts of the country since the past few weeks.

         "We will conduct market operations until rice prices are stable. But we also have to keep vigilant because  harvest time will soon arrive. The belated harvest time will give rise to rice oversupplies in April and May that may put pressure on rice prices," Deputy Agriculture Minister Bayu Krisnamurthi said.

         He said several factors had caused rice prices to soar in recent weeks although in general rice production showed no signs of problems. The current increase in rice prices was the result of the belated harvest time because of heavy rains in several parts of the country.

         "Nearly 10-15 percent of areas in Indonesia sees belated harvest time, causing rice prices to increase," he said.

         Quoting the results of a survey, he said a number of provinces, including East Java, Central Java and West Java were expected to see harvest time in mid-February.

         The rice price hike is also triggered by the government-set purchase price and poor inter insular rice shipment because of large waves. Several provinces, including Yogyakarta, West Nusa Tenggara, and Jakarta had already launched market operations.

         The subsidized rice sold in the market operations was Rp200-Rp500 lower than the normal prices and the government did not set a target of selling rice through the market operations, Krisnamurthi said.

         "The important thing is that the prices will not go up because in the past month they have been raised by an average of Rp1,000 a kg," he said.

         Rice prices in various parts of the country have increased to about Rp6,500 per kg. The increases vary in different regions, in Bengkulu for example, rice price has increased from Rp5,460 per kg last week to Rp8,000 per kg.

    

(T.A014/H-NG )  2010

MARKET OPERATIONS CALLED FOR TO OFFSET INFLATION

Jakarta, Sept 2 (ANTARA) - Businesses and economic observers advised the government that it should launch market operations, control goods distribution and not to raise Bank Indonesia (BI)'s benchmark interest rate in an effort to offset inflation and basic necessary price hikes in the face of religious Idul Fitri, Idual Adha and Christmas holidays as well as new year.
     As prices of essential food commodities in the current fasting month are on the rise, economic observer Aviliani forecast that inflation in September 2008 would reach about one percent, exceeding the August rate of 0.51 percent.
     "Inflation will reach this level if the government is unable to control the increasing prices of goods and services," she said.
     She said inflation was expected to be relatively high in the months ahead due to an expected surge by about 10-25 percent in basic necessaries' prices.
     In order to curb the inflation, the Indonesian Chamber of Commerce and Industry (KADIN) called on the government to launch market operations. It was important for the government to control basic commodity prices so that speculators would not capitalize on high demand during the fasting month and in the runup to the Idul Fitry holidays.
     "Although inflation in August declined to 0.51 percent from 1.37 percent in July, it will likely increase to about 25 percent in September," Bambang Soesatyo, chairman of KADIN's permanent committee for fiscal and monetary affairs, said.
     He said the August inflation rate of 0.51 percent had not included price increases of basic necessaries and liquefied petroleum gas which had been on the upward trend since two weeks before the fasting month.
     "KADIN hopes that the government and the monetary authorities will not let the seasonal inflation hikes take place as a routine matter in the face of the religious holiday festivities," he said.
      However, according to economic observer Edwin Sinaga, the annual inflation rate which has reached 11.5 percent will prompt the Indonesian central bank (Bank Indonesia/BI) to once again raise its benchmark interest rate (BI Rate) which at present stands at 9.0 percent. BI recently raised its rate by 25 basis points from 8.75 to 9.0 percent.
    "BI will once again raise its rate by 25 basis points to 9.25 percent in an effort to curb the upward trend in inflation which has exceeded the government's target of 11.2 percent," Edwin Sinaga said.
     Director for macro-planning affairs at the National Development Planning Board (Bappenas), Bambang Prijambodo, said BI should maintain its benchmark interest rate at 9 percent while ascertaining whether a present easing in the upward trend in inflation will continue to take place.
     "In essence, there is need to make sure  the easing  in the upward trend in the inflation rate will last  before taking a decision to change the benchmark interest rate," he said. He was referring to the August inflation rate at 0.51 percent which declined from 1.37 percent a month earlier.
      He said BI did not yet need to respond to the August inflation of 0.51 percent and the year-on-year inflation of 11.86 percent by raising or lowering its reference interest rate.
      Therefore, Bambang Soesatyo suggested that the government conduct market operations. The government still had a chance to control the increase in the basic commodity and gas prices at the retail level by launching market operations.
     "Market operations could eliminate the chance for speculators to raise prices at will," he added.
     He said if the government was not able to curb the prices of basic commodities and gas which at present had reached Rp100,000 at the retail level in a number of cities outside Java, inflation would  badly affect the national economy.
     It seems, however, that market operations alone would not work effectively. Aviliani, who is an INDEF (Institute for Development of Economics and Finance) researcher said the government could take under control only the prices of four commodities through market operations, namely sugar, rice, cooking oil and wheat flour.
     The government would be helpless with regard to the increase in the prices of other commodities because they were controlled by the market mechanism.
     Therefore, she called on the government to control the distribution of goods. "There is a way to reduce the price increases, namely by supervising goods distribution. No matter how large the number of stocks, if their distribution is not controlled their prices will go up," she said.
     She said gas for household needs, for example, if its distribution was not controlled, it would most likely become a trigger of inflation, even without a government decision to raise its price.
     In connection with an estimate that inflation would reach 12 percent in 2008, Aviliani asked BI not to increase its benchmark interest rate.
     "There is no need to offset inflation by raising the interest rate. This is for the sake of banking credit growth and the development of the infrastructure and plantation sectors," she added.
      Yet, Edwin Sinaga saw positive points for BI to increase its rate. He said that the increase in the BI Rate was expected to encourage foreign investors to place their funds again in the Indonesian money markets.
     "So far, many foreign investors have withdrawn their funds and invested their money in other markets which are more profitable," he added.(T.A014/A/HAJM/A/E002) Sept 2, 2008