Inflation exceeds 25 percent for first quarter

Inflation exceeds 25 percent for first quarter

JAKARTA (JP): Indonesia's inflation rate soared to 25.13
percent in the first quarter of 1998, with month-on-month
inflation rising 5.49 percent in March, the Central Bureau of
Statistics said yesterday.

Bureau chief Sugito Suwito said the country's economic growth
last year was 4.6 percent, but he predicted a shrinkage for 1998
without giving specific figures.

Some government sources, however, predicted that Indonesia's
economy could contract by about 5 percent this year.

In international trade, Indonesia posted a US$1.78 billion
trade surplus in January, an increase from $1.53 billion in
December. The increase is attributed largely to a sharp decline
in imports.

Sugito forecast a fall in the inflation rate in the months
ahead because of imminent large rice harvests and the
government's tight monetary policy which would dampen consumer
demand.

However, he warned that if the government phased out certain
subsidies, especially fuel subsidies, the inflation rate would
quickly jump higher.

"If there is a drastic cut in subsidies, then inflation will
of course shoot up quickly," Sugito said.

Indonesia has been mired in a deepening economic crisis since
the rupiah began to slide in value last July. The crisis has
crippled the country's businesses, leading to massive layoffs and
sending prices soaring.

Sugito, however, predicted that the inflation rate for 1998
would be below 47 percent.

The inflation rate for the 1997/1998 fiscal year ending March
31 was 34.22 percent -- the highest during the New Order
administration -- compared with 5.17 percent in the previous
fiscal year.

"The monetary crisis and the drought last year pushed the
inflation rate this high," he said.

Sugito said March's 5.49 percent inflation rate was much
higher than that in March 1997 which recorded a deflation of 0.12
percent.

However, last month's inflation rate was relatively low
compared with February's 12.76 percent jump and January's 6.88
percent rise.

The lessened rate increase was attributed to rice market
operations by the State Logistics Agency (Bulog) and the
beginning of rice harvests in some parts of the country.

Sugito said food prices, which increased 4.42 percent, were
the biggest contributor to the consumer price index rise in
March, accounting for 40 percent.

The second largest source was clothing, which rose 12.5
percent largely due to high import content. Clothing price
increases accounted for 24 percent of March's inflation.

The housing price index rose 3.5 percent and miscellaneous
goods and services increased 4.27 percent, mainly because of
higher cigarette prices.

Sugito said the bureau would use the results of the 1996 cost
of living survey as the basis for calculating inflation starting
this month.

The new index will expand the coverage to between 250 to 300
commodity items in the 27 provincial capitals and 17 other major
towns throughout the country. (aly/rid)