Economists: Industry needs to refine strategy to address energy price dynamics

Jakarta (ANTARA) - Executive Director of the Center of Reform on Economics (CORE) Indonesia, Mohammad Faisal, believes that the industrial sector needs to mature its strategies related to production and product distribution in response to the dynamics of global energy commodity prices resulting from the current geopolitical situation.

Faisal, when contacted in Jakarta on Wednesday, stated that in general, the rise in energy commodity prices has a significant impact on increasing operational costs, production costs, and inflation at the producer level.

“This could lead to an increase in the selling price of processed products, meaning it is transmitted to prices at the consumer level,” said Faisal.

In agreement, Executive Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira Adhinegara, said it is important for industry to consider the limitations of public purchasing power.

He stated that currently, industry has already been affected by import logistics costs following the use of international oil references by transport ships.

“Imported inflation from the producer side will be passed on to end consumers. For example, in the food and beverage sector,” he said.

Furthermore, Bhima predicted price adjustments due to ongoing production cost pressures in the next 2-3 months, even though the escalation from the war is beginning to subside.

“The recommendations are four. First, immediately reduce the VAT rate to 9 percent from 11 percent as a stimulus for consumers and business actors. Then, ensure that the energy subsidy budget is sufficient so that energy inflation can be prevented. This requires budget reallocation from non-urgent programmes,” said Bhima.

“Third, assist in realising investments in the industrial sector, both by Danantara and the private sector, and maintain exchange rate stability to avoid excessive fluctuations in imported raw materials,” he added.