'Weak consumer demands helps ease inflation'<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
While having a positive impact on the country's economy, the
\ncurrent declining inflationary trend indicates the worrying fact
\nthat the public's purchasing power has been on the decline,
\naccording to analysts.<\/p>\n
Fauzi Ichsan, StanChart economist, told The Jakarta Post that
\nthe public's purchasing power had been on the decline for the
\npast few years in line with the decline in foreign investment and
\na consequent decline in consumer demand.<\/p>\n
This had helped stabilize the prices of goods over the past
\nfew months.<\/p>\n
\"So, the current benign inflationary environment is not
\nentirely the result of stable prices for goods, but also because
\nthe members of the public have limited income to spend buying
\nthings,\" Fauzi said on Tuesday.<\/p>\n
He said the poor investment showing over the past three years
\nhad badly hit domestic industry, with many firms being forced to
\nreduce production capacity and lay off workers. This has led to a
\ndecline in the public's purchasing power.<\/p>\n
\"That has been the case for at least two years, and this is
\nwhat is causing relatively low consumer demand,\" he said, adding
\nthat a continuing increases in utility prices were causing
\nfurther difficulties.<\/p>\n
Fauzi was referring to the recent report from the Central
\nStatistics Agency (BPS) that showed that inflation remained in
\ncheck, with the rate reaching 2.11 percent over the first eight
\nmonths of the year, the lowest level in decades.<\/p>\n
Theoretically, low inflation should be good for the economy as
\nit paves the way for Bank Indonesia to keep aggressively cutting
\nits benchmark interest rate -- already at an historic low -- and
\neventually push the banks to make loans cheaper.<\/p>\n
The interest rate on Bank Indonesia's one-month SBI promissory
\nnotes currently stands at 8.83 percent, as against around 13
\npercent earlier this year.<\/p>\n
The government has been boasting that the fact that inflation
\nis pretty much on track to meeting the full-year target of around
\n6 percent is the result of sound macroeconomic management.<\/p>\n
But, rather than boasting about its accomplishments, the
\ngovernment should instead focus on how to jack up the people's
\npurchasing power, a crucial factor in keeping the country's
\ndomestic consumption robust, Fauzi added.<\/p>\n
\"So, real investment is the key word as it can create plenty
\nof job opportunities and thus strengthen the purchasing power of
\nthe public,\" he said.<\/p>\n
A researcher at another foreign bank concurred, saying raising
\nthe public's purchasing power was the only way to boost domestic
\nconsumption.<\/p>\n
Consumption has been the main engine of the country's economic
\ngrowth, but its contribution had been decreasing lately, both
\nadded.<\/p>\n
Recently, the Danareksa Research Institute revealed that
\nconsumer confidence in the country was falling, signaling a
\nweakening in purchasing power.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/weak-consumer-demands-helps-ease-inflation-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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