Price hikes will curtail economic growth: LIPI<\/p>\n
Sari P. Setiogi, The Jakarta Post, Jakarta<\/p>\n
The recent rises in utility prices will curtail economic
\ngrowth by 0.17 percentage points, raise the inflation rate by
\n2.27 percentage points and reduce the growth of people's welfare
\nby 0.13 percentage points, according to a government research
\nagency.<\/p>\n
Wijaya Adi, an economic research associate at the Indonesian
\nInstitute of Science (LIPI), told a news conference here on
\nWednesday that the price hikes would also put 80,000 people out
\nof work and reduce the government's tax revenue by Rp 7.7
\ntrillion (US$855.55 million).<\/p>\n
Earlier this month, the government simultaneously increased
\nfuel prices by an average of 22 percent, electricity billing
\nrates by 6 percent and telephone charges by 15 percent, sparking
\nstrong protests from employers, workers, university students and
\nother members of society.<\/p>\n
\"With the rises in utility prices, the Indonesian economy will
\nlikely grow by only 3.87 percent this year, lower than the 4
\npercent targeted by the government,\" Wijaya said.<\/p>\n
He said the price hikes would also increase the prices of
\nother products and services and cause the consumer price index to
\nincrease by 11.27 percent this year, 2.27 points higher than the
\n9 percent targeted by the government.<\/p>\n
\"Higher inflation will surely cause an increase in the bank's
\ninterest rates, which in turn will affect the growth of domestic
\ninvestment activities,\" he said. \"As a result, about 80,000
\npeople will lose their jobs.\"<\/p>\n
The increase in the price of consumer goods will also lower
\npeople's purchasing power and welfare growth, therefore, this
\nfigure will most likely fall short of the government's target of
\n2.55 percent and reach a mere 2.42 percent this year, he said.<\/p>\n
Because economic growth will be lower than the previous
\ntarget, the government's revenue from taxation in the non-oil
\nsector is likely to decline by Rp 1.5 trillion. \"If this figure
\nis added to the potential loss of Rp 6 trillion in tax revenue as
\na result of the government's recent tax incentives, the total
\npotential loss in tax earnings will reach Rp 7.5 trillion,\" he
\nadded.<\/p>\n
The government, under its budget plan announced late last
\nyear, expects to generate Rp 106.15 trillion from taxation in the
\nnon-oil sector.<\/p>\n
Wijaya said that because the government was apparently not
\nprepared with the necessary measures to cope with the impact from
\nthe utility price hikes, it should revoke the decision.<\/p>\n
He explained that the decision to increase the prices showed
\nthat the government did not understand people's state of mind.<\/p>\n
\"The decision on the triple price hikes was made at the wrong
\ntime: after a succession of public holidays -- Idul Fitri,
\nChristmas and other year-end festivities. People's finances were
\nalready stressed with the extra expenses and some families might
\nhave even run out of savings,\" he said.<\/p>\n
\"Listening to the government's ad hoc responses toward the
\nrecent mass protests against the price hikes, we can also see
\nthat the officials did not think beforehand of the possible
\nimpacts from the decision,\" he said. \"The government, therefore,
\nshould cancel the price hikes.\"<\/p>\n
If the price hikes were considered that urgent and
\nunavoidable, the government should have raised the prices
\ngradually, he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/price-hikes-will-curtail-economic-growth-lipi-1447893297",
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