Inflationary pressures<\/p>\n
Over the last few months, President Soeharto has been
\ninstructing his ministers to coordinate concerted efforts to curb
\nprice increases in general. In fact, anti-inflation measures have
\nbeen one of the highest priority items on the agenda of the
\nmonthly limited cabinet sessions on economic affairs since early
\nthis year.<\/p>\n
Nonetheless, the latest monthly figure for the consumer price
\nindex, as announced after the limited cabinet meeting on
\nWednesday, is causing a great concern. The inflation last month
\nrose again to 0.89 percent from 0.53 percent in September,
\nthereby bringing the cumulative inflation during the first 10
\nmonths of this year to 8.27 percent.<\/p>\n
Many might find some consolation in that the figure was still
\nslightly lower than the 8.77 percent cumulative inflation in the
\ncorresponding period of last year. But the comparison is actually
\nnot fair because the biggest cause of inflationary pressures last
\nyear -- the almost 30 percent increase in fuel prices that
\ntriggered price rises in almost all other sectors -- does not
\nexist this year.<\/p>\n
Therefore, extra caution is needed to check inflation at a
\nsingle-digit level for the whole year, especially in view of the
\n7.68 percent increase in the electricity rates as of this month
\nand the Christmas and New Year holidays next month. Assuming that
\nthe government could contain the impact of the electricity price
\nrise, the inflation for the whole year could yet be checked below
\n10 percent, but would be in the higher range of the single-digit
\nlevel, or about the same level as last year's 9.77 percent.<\/p>\n
The inflationary pressures this year have been caused mainly
\nby the rising costs of the food and housing components (cement)
\nof the consumer price index. Regrettably the higher costs of the
\ntwo components have not been generated by real supply shortages,
\nbut rather by distribution problems. That means that the
\ninflationary pressures could have been reduced through better
\ncoordinated efforts by the various related ministries.<\/p>\n
The rice price increase actually had been foreseen last year
\nas the dry season this year was forecast to be much longer than
\nusual. But the impact could have been minimized with better stock
\nmanagement, especially because rice production was estimated to
\ndecline by less than four percent this year.<\/p>\n
Extreme lack of coordination in managing cement stocks for
\ndomestic consumption and exports seems to have been mainly
\nresponsible for the steep rise in cement prices since July.<\/p>\n
Many officials or greedy businessmen may not fully realize
\nthat inflation is bad for everybody. It unsettles economic
\nassumptions in the marketplace, making people uncertain about the
\nfuture and prompting them to become short-sighted instead of
\nthinking in terms of long-time horizons. Further down the road,
\nhigh inflation accelerates the rate of rupiah depreciation, thus
\nencouraging people to use their money in speculative activities.
\nHigh inflation punishes savers and rewards debtors.<\/p>\n
High inflationary pressures also are inimical to sound
\nbusiness. High inflation makes it extremely difficult to plan
\nbusiness operations as there is a high degree of uncertainty
\nabout the future prices of input and output, bank interest rates
\nand foreign exchange rates.<\/p>\n
Hence, President Soeharto's instruction on the anti-inflation
\nmeasures is crucial for promoting sound economic growth because
\nlow inflation makes changes in prices much more transparent to
\nboth consumers and businesses. Therefore it is imperative for all
\nbusinessmen, as the suppliers, and officials, who are responsible
\nfor facilitating services and providing and maintaining the
\ninfrastructure needed for a smooth distribution system, to better
\ncoordinate their efforts.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/inflationary-pressures-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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