Inflation declined by 0.28 percent in May

JAKARTA (JP): Indonesia's consumer prices declined by 0.28 percent in May, the country's third month of deflation in a row, the Central Bureau of Statistics (BPS) reported on Tuesday.

BPS chief Sugito Suwito said that the consumer price index declined to 204.76 in May from 205.34 in April, bringing the year-on-year inflation (May 1998 - May 1999) to 30.73 percent.

"The negative monthly inflation rate was primarily caused by a 1.35 percent decline in the prices of basic food commodities," he told a press conference.

He added that a 0.15 percent decline in the prices of processed foods, beverages, cigarettes and tobacco, and a 1.03 percent drop in the prices of clothing had contributed to the deflation.

"But the deflation rate is slowing particularly as prices of other commodities, especially rice, have started to increase," Sugito said.

He added that prices in the housing, health, education, recreation, sports, and telecommunications and transportation sectors inflated in May.

Indonesia posted a deflation of 0.18 percent in March, and 0.68 percent in April.

Sugito said that the relatively peaceful campaigning by the 48 political parties ahead of the June 7 general election and the undisturbed distribution sector had helped in preventing price rises.

He added that the relatively stable exchange rate of the rupiah against the U.S. dollar also contributed to the monthly deflation.

Sugito, however, declined to confirm whether the government inflation target of 10 percent by the end of the 1999/2000 fiscal year in March would be attainable.

"There's still uncertainty surrounding the country's political condition over the next six months," he said.

The government earlier projected an inflation target of 17 percent for the current fiscal year, but recently revised it to 10 percent following positive development in the country's macroeconomic picture.

Some analysts said that the new inflation target was realistic.

"I think it's a reasonable target," said Budi Hikmat, a senior economist at PT Bahana Securities.

He added that the deflation in May was expected particularly in view of the harvest season of food crops which traditionally occurs in the first quarter of the year.

"Inflationary pressure in the first half will be relatively nil, but we may have an inflationary problem in the second half," he said, pointing out higher demands resulting from year-end Christmas and Millennium celebrations and a lower interest rate environment.

"There may be a decline in industrial production due to the Y2K problem," he said, citing the millennium bug computer malfunction.

BPS also reported exports declined by 3.78 percent in April to US$3.77 billion from $3.92 billion in March, with oil and gas exports dropping by 0.60 percent and non-oil and gas exports falling by 4.40 percent.

It said exports during the first four months of this year dropped by 13.95 percent to $13.91 billion compared to the same period in 1998.

"Exports of textiles, timber products, and electronics dropped significantly," Sugito said.

BPS reported that imports in April were $1.80 billion, which was 7.41 percent lower than the level in March.

It said imports in the first four months of this year sharply dropped by 19.82 percent to $7.32 billion compared to the same period last year.

It added, however, that the import of consumption products from January to March jumped by 51.48 percent to $527.3 million compared to the same period in 1998.

On the other hand, imports of raw materials during the same period declined by 19.63 percent, and imports of capital goods plunged by 51.33 percent, BPS said.

BPS said tourist arrivals in the first quarter of this year increased by 5.22 percent to 1.25 million compared to the same period last year despite the uncertainties in the country's political and social condition.

But it said tourist arrivals in April dropped by 10.24 percent to 305,814. (rei)