Aditya Suharmoko , The Jakarta Post<\/p>\n
While the global economic slowdown is not expected to greatly affect Asian economies, Indonesia's biggest challenge lays in subduing its inflation rate to protect public purchasing power, a discussion concluded Wednesday.<\/p>\n
\"Indonesia's biggest challenge is probably in keeping inflation rate under control in light of increasing commodity prices,\" Singapore-based Citigroup economist, Moh Siong Sim, said on Wednesday.<\/p>\n
Over the past several months, Indonesia's has experienced a spiraling in price of key commodities, including rice, soybean, wheat, flour and cooking oil, accelerating an already hasty inflation rate.<\/p>\n
Sluggish agricultural growth has caused companies to import foodstuff, forcing them to pay skyrocketing global prices, which in turn have driven up prices of foodstuff produced locally.<\/p>\n
\"Rising food prices can cause riots because poor people are unhappy,\" Sim said.<\/p>\n
On average the poor spend about 60 percent of their income on foods, according to macro-economic planning director of the National Development Planning Agency, Bambang Prijambodo.<\/p>\n
Bambang said the government would strive to reduce inflation by stockpiling key commodities to help maintain stable prices.<\/p>\n
He said the government would opt to provide hefty fuel subsidies, rather than raise fuel prices, in a bid to maintain public consumption power, the country's main source of economic growth.<\/p>\n
\"We have decided to keep fuel subsidies in place in order to maintain consumption power and to ease inflation,\" he said.<\/p>\n
The government is proposing fuel subsidies reaching Rp 130 trillion (US$14.16 billion) for a revision of the 2008 State Budget, almost three times higher than the Rp 45.87 trillion allocated in the current budget, based on an oil price assumption of US$95 per barrel.<\/p>\n
Sim said in light of inflation worries, the central bank was unlikely to lower its benchmark interest rates.<\/p>\n
Lower rates are needed to propel banks to channel affordable loans for the expansion of the corporate sector.<\/p>\n
\"We expect Bank Indonesia's rates to remain steady throughout the year,\" said Sim.<\/p>\n
Currently, the central bank benchmark interest rate stands at 8 percent, while the U.S. Fed rate is at 2.25 percent.<\/p>\n
Sim said maintaining a favorable rupiah exchange rate against the U.S. dollar was another way to stave off inflation.<\/p>\n
Bambang and Sim estimated the rupiah would hover between Rp 9,000 and Rp 9,200 per dollar this year.<\/p>\n
\"A stable currency will ease inflation expectations,\" said Sim.<\/p>\n
Citigroup have forecasted Indonesia's economy to grow by 6 percent this year, with inflation estimated at 7 percent.<\/p>\n
Last year the Indonesian economy, the largest in Southeast Asia, grew 6.32 percent, while inflation reached 6.59 percent, according to the Central Statistics Agency.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/ris-biggest-challenge-is-curbing-inflation-1206578771", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }