BPS statistics paint bleak picture of economy

BPS statistics paint bleak picture of economy

JAKARTA (JP): The Central Bureau of Statistics (BPS) painted
on Friday a bleak picture of the country's economy, with monthly
inflation in May at its highest level since January.

The bureau also reported a hefty 9.3 percent drop in exports
to US$4.8 billion in April following a 10.5 percent increase in
March.

BPS said the monthly inflation rate in May rose to 1.13
percent, the highest monthly level this year. If compared to the
same month last year, inflation rose 10.93 percent, far higher
than the government's revised inflation target of 9.3 percent for
this year.

The bureau said cumulative inflation from January to June had
already hit 3.73 percent.

BPS deputy Kusmadi Saleh attributed the surge in the May
inflation rate to the psychological effect of the fuel hike
announcement.

"This (effect) is indicated in the May inflation rate, but we
didn't expect it to be so high," he said during a monthly media
conference.

The government announced in May its plan to raise fuel prices
and electricity rates in June in a bid to reduce the state budget
deficit.

Kusmadi warned that once the fuel price hike became effective
prices would again rise.

"Once the government decides on something it should stick to
it and not waver. Otherwise we will see more of this
psychological effect," he said.

Every consumer category recorded higher prices in May, led by
a 1.97 percent surge in the clothing price index, BPS said.

The next largest increase was in the raw food price index at
1.5 percent, followed by the beverages, cigarettes and tobacco
index at 0.99 percent and the housing index at 0.81 percent.

BPS also reported a 9.3 percent drop in exports to $4.8
billion in April from $5.22 billion the previous month. The
plunge was largely the result of weaker oil and gas exports.

The bureau said export revenue from the oil and gas sector
fell a staggering 21.96 percent, mainly on seasonal factors. Non-
oil and gas exports in April reached $3.74 billion, or 3.13
percent less than the previous month's $3.86 billion.

Imports in April also fell significantly, landing at $2.93
billion from $3.03 billion the previous month, a drop of 3.03
percent. This slashed April's trade surplus to $1.87 billion from
$2.1 billion in March.

BPS said the decline in imports was largely the result of a
9.68 percent drop in imports in the oil and gas sector on the
back of stronger local supply.

Double digits

The chief researcher at the Danareksa Research Institute,
Raden Pardede, estimated that the inflation rate during the
current fiscal year would reach double digits.

Raden said the combination of weaker consumer purchasing power
and an estimated slowdown in economic growth would push inflation
to above 10 percent.

The end of the harvest season, imported inflation because of
the weak rupiah and the plan to raise fuel and electricity prices
hammered last month's consumer price indexes, he explained.

Raden predicted the pressure on the consumer price indexes
would continue because the fuel price hike had yet to come into
effect.

According to him, inflation is likely to increase in June and
July, with the government expected to hike fuel prices for the
public by 30 percent and electricity rates by 20 percent.

"The peak will be in July. Afterward I expect the pressure to
ease and an inflation pull factor to set in," he said, adding
that year-on-year inflation in July could hit 11 percent.

"GDP (gross domestic product) growth will slow on weaker
demand as consumption and investment drop," he said.

A slowdown in demand could push this year's second and third
quarters into negative GDP growth.

"Whereas growth in the fourth quarter depends on how the
political situation develops," he added.

According to him, the government could not take credit for any
economic growth of up to 3 percent. "It's hand-off growth."

He said the government could only be seen as playing an
effective role if the economy grew by at least 7 percent to 8
percent.

He added that the government was having a difficult time
effectively implementing economic policies because of the
continued resistance from legislators. (bkm)