Jakarta, CNN Indonesia —
Central Bureau of Statistics (BPS) notes inflation by 4.35 percent in June 2022 compared to the same period the previous year (year on year/yoy).
The increase in annual inflation, which is above the number four, is the highest since 2017 or the last five years. The increase in inflation was mainly due to volatile food price increases (volatile food) which reached 10.07 percent (yoy).
Food commodities that increased include red chili, cayenne pepper, and shallots. The price spike occurred due to high rainfall in the central area, causing crop failure and distribution disruption.
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In addition, this increase in inflation also occurred amid global uncertainty due to Russia’s war with Ukraine and soaring crude oil prices.
Head of the Fiscal Policy Agency of the Ministry of Finance Febrio Kacaribu said that although inflation was quite high, Indonesia was still better than other countries. Moreover, developed countries have the highest inflation in decades.
“Compared to many countries in the world, Indonesia’s inflation is still relatively moderate. Inflation rates in the US and the European Union have continued to record new records in the last 40 years, reaching 8.6 percent and 8.8 percent, respectively,” he said in an official statement, Monday (4/7).
Likewise, when compared to other developing countries such as Argentina and Turkey, with inflation rates reaching 60.7 percent and 73.5 percent, respectively.
He said inflation in Indonesia is still better because various policies implemented by the government to reduce global commodity price fluctuations were successful.
“The government, through the State Budget instrument, has succeeded in reducing high global inflationary pressures, so that people’s purchasing power and the momentum of national economic recovery can still be maintained,” said Febrio.
If so, can our economy still be seen as strong?
Center of Economic and Law Studies (CELIOS) economist Bhima Yudhistira said that rising inflation must be watched out for in the second half of this year. The reason, he began to smell the signs that inflation leads to stagflation.
This can be seen from the high annual inflation increase in June. The increase is abnormal or unnatural. This is because, after Lebaran season, ideally, inflation will begin to decline due to the normalization of food prices.
“Unnatural inflation is a sign of a signal of stagflation, namely the condition of rising inflation is not accompanied by an increase in job opportunities,” said Bhima to CNNIndonesia.com.
He said there were still 11.5 million workers affected by the pandemic. The number he mentions is in line with data from BPS which records the number of working age population affected by the COVID-19 pandemic decreased by 7.57 million people in the last year, bringing the total to 11.53 million people in February 2022.
Bhima said that under these conditions, inflationary pressures in the next few months could continue. He predicts inflation by the end of the year can reach 4.5 percent to 5 percent (yoy).
He mentions the biggest risk is imported inflation, namely the weakening of the exchange rate which makes the prices of various domestic goods increase. In addition, government policies that ‘force’ people to buy Pertamax fuel by implementing a policy of buying subsidized Pertalite and diesel fuel with the MyPertamina application can also trigger an increase in inflation.
Not only that, the implementation of MyPertamina as an obligation to buy Pertalite can also increase the number of new poor people. He is also worried that this will result in a significant weakening of household consumption.
The weakening can actually be smelled from the transition or migration carried out by the community from Pertamax to Pertalite when the government raised the price some time ago.
“Imagine that poor people must have gadgets, buy credit first to get their rights. Meanwhile, only the bottom 14 percent of deciles or poor households use the internet,” added Bhima.
Regarding the statement from the Ministry of Finance which stated that inflation in June was still moderate, Bhima said it was because producers were still holding on to prices.
“Dan administered prices or subsidized energy prices are still maintained by the government. Until the first quarter of 2022, producer price inflation has actually been 9 percent yoy,” he added.
Therefore, he asked the government to hold back the restrictions on fuel subsidies, 3 kg LPG, and electricity tariffs. Moreover, the state budget is still in a surplus of Rp132 trillion as of May 2022.
He believes the government can withhold subsidies with several options. First, Switch windfall revenue from commodities to energy subsidies.
Seconddivert some of the national economic recovery funds (PEN) that have not been absorbed to add compensation for fuel and electricity. Thirdpostpone infrastructure projects that have not been prioritized.
The Inflation Surge Still Has The Chance To Happen
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