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