Does a Weakening Dollar Not Affect Villages? Here Are the Facts
Nailul Huda, the Director of Economics at the Centre of Economic and Law Studies (CELIOS), stated that the weakening of the rupiah against the US dollar will impact various sectors, ranging from inflation and rising fuel distribution costs to increased commodity prices. Huda addressed statements made by President Prabowo Subianto, which suggested that the depreciation of the rupiah does not affect people living in rural areas.
“Therefore, Prabowo’s claim that the rising dollar does not impact rural communities is incorrect. Furthermore, as prices rise, people in villages will certainly feel the impact,” Huda said when contacted in Jakarta on Monday.
Huda noted that imported inflation is inevitable, particularly for goods involving imports, whether they are raw materials, auxiliary components, or consumer goods. He predicts that price increases will occur within the next two to three months.
Huda cited the price of plastic as an example, which has already risen due to scarcity and high distribution costs. With the rupiah’s exchange rate continuing to weaken, Huda suggested that plastic prices will become even more expensive in the future.
“As a result, the price of goods that use plastic will also increase. Are there no plastics used in villages? Of course, there are many, and this erodes the wallets of rural residents,” Huda remarked.
He noted a similar trend for electronic goods, which rely on imported components. Huda stated that the prices of electronics will also rise as a result of these adjustments.
“Are there no televisions or other electronic components in villages? Certainly, there are, and this further pressures the rural economy,” he continued.
Huda added that this situation could also affect agricultural products, such as fertiliser. He pointed out that a significant portion of the raw materials for fertiliser, such as gas, are imported.
“When supplies are disrupted and the rupiah weakens, the result is an increase in fertiliser prices. Rising fertiliser costs will undoubtedly disrupt the agricultural sector,” he added.
On the other hand, Huda noted that purchasing power has yet to improve due to various domestic pressures. He warned that producers would think twice before raising selling prices.
Huda concluded that rising production costs combined with declining demand would force businesses to implement efficiency measures, one of which could include workforce reductions or layoffs.