JAKARTA (The Jakarta Post/Asia News Network): Bank Indonesia (BI) projects annual inflation in the first half of this year will still hover above 5 per cent year on year (yoy), according to the central bank chief on Sunday (March 5).
The new projection marked a setback for BI’s optimistic estimates in February that announced inflation would fall more quickly to the country’s usual target, getting below 4 per cent yoy in the first half of this year, before continuing to subside to no more than 3.5 per cent in the second half.
BI decided to keep interest rates unchanged in February, stating no further hikes were needed considering inflation would cool faster than anticipated.
"We need to work hard to reduce the inflation rate, especially food-related price surges," BI Governor Perry Warjiyo (pic) said as quoted from Reuters.
However, the central bank expected that the country would still hit the target of reducing inflation to below 4 per cent by the end of this year.
Perry also remained assured that the country's gross domestic product (GDP) would grow between 4.5 to 5.3 per cent yoy this year.
"Based on our prediction, it would be around 4.9 per cent yoy, and could go up to 5.1 per cent if we can push domestic consumer spending and increase our exports to India and China," Perry said.
Perry noted some important prices that need "to be controlled", in order to reduce inflation rates, namely rice, cooking oil and airline fares, which often see significant price increments as the biggest Muslim country in the world enters the holy month of Ramadan.
"Last month the rice price increased everywhere, even though there are still stocks of rice.
But the supply suddenly disappeared [from the market]," Perry stated.
Last Wednesday, Statistics Indonesia (BPS) also urged caution on the typical seasonal rise in consumer prices during Ramadan, especially household fuel, cooking oil and chicken.
The country saw a significant hike of 0.68 per cent in monthly inflation during Ramadan in 2019 and a 0.95 per cent jump for Ramadan last year.
Last year, the government along with the central bank launched a National Movement for Food Inflation Control (GNPIP), which reduced food-related inflation from 11.47 per cent in July last year to 5.61 per cent in December 2022.
The central bank has continued the programme this year, through collaboration among its 46 regional offices and regional governments. Some of the programme’s plans include conducting market operations, expanding the usage of organic fertiliser and intensifying regional cooperation to distribute excess produce to regions that require more supply.
