Sat, 02 Dec 2000

Inflation hits 7.26 percent in 2000

JAKARTA (JP): The Central Bureau of Statistics (BPS) said on Friday that inflation from January to November had reached 7.26 percent, already higher than the government's target of 7.0 percent for the whole year.

BPS deputy Kusmadi Saleh said that increases in all categories of the consumer price index pushed month-on-month inflation to 1.32 percent in November.

The bureau reported that the year-on-year inflation rate, measuring inflation from November 1999 to November 2000, stood at 9.12 percent.

"This is a warning to the government, it is alarming right now," Kusmadi said at a press conference.

The government has already revised its inflation target to 6.0 percent to 9.0 percent for the year, after it hiked fuel prices by an average of 12 percent in October.

According to Kusmadi, the upcoming festive seasons of Christmas, Idul Fitri and New Year's Eve may cause stronger inflationary pressures this month.

Furthermore, the persistent weakening of the rupiah against the U.S. dollar resulted in more expensive imports, which affected prices of consumer products.

"This is evident in the increase in the food price index this month," he added.

The bureau reported that the largest contributor to November's inflation was the rise in prices of commodities which make up 58 percent of the index.

The second largest increase was recorded in the index of processed foods, beverages, cigarettes and tobacco, which comprise 32 percent of the index.

Kusmadi estimated that the rupiah could fall further, as a surge in outbound tourists in December would increase demand for the greenback.

The rupiah has taken a beating since early November when it breached the 9,000 level against the U.S dollar. It now hovers at around Rp 9,500 on continued political uncertainties.

Flooding in provinces like Aceh, North and West Sumatra could disrupt the food distribution system and nudge inflation even higher, Kusmadi cautioned.

He said that an inflation rate of 9.0 percent this year might be unavoidable under the worst scenario, adding that he was optimistic that scenario would not occur.

A worst case scenario, he said, was similar to what happened in 1997 when the inflation in December surged to 2.04 percent.

"But remember, back then the rupiah fell from Rp 2,000 per US dollar to 4,000 in a short period of time," Kusmadi added.

On international trade, BPS reported that exports in October fell to US$5.48 billion from $5.79 billion in the previous month.

Non-oil and gas exports fell by 6.59 percent to $4.16 billion while oil and gas exports fell by 1.19 percent to $1.32 billion, the bureau said.

"If the export performance remains steady, minimally at a monthly level of $5 billion for the next two months, then exports for the whole year may exceed $61 billion," BPS said.

The government initially targeted total exports this year to reach only $45 billion.

Kusmadi didn't foresee a drastic change in exports in the short term.

"This (export) is not just a matter of price. It's a technical system and unless something extraordinary happens, in the short period it will remain more or less stable," he said.

He said that exports of machinery and electronic equipment this month made the deepest plunge, down $101.9 million to $548.7 million. Whereas the highest surge was recorded in coal exports, which grew by $46.3 billion to $149.7 million.

Trade surplus in October fell to $2.08 billion from last month's $2.28 billion as imports maintained its upward trend.

October imports rose slightly by 1.46 percent to $3.45 billion from $3.40 billion in the prior month.

BPS recorded a sharp drop of 11.46 percent in oil and gas imports to $571.1 million.

But an increase of 4.48 percent in non-oil and gas imports, more than offset the drop, reaching $2.88 billion.

"The average 6.45 percent monthly growth in imports in the past eight months is a positive indicator of a strong recovery in the manufacturing sector," BPS said.

Kusmadi said that although the rupiah continued to weaken it would unlikely affect the imports of raw material in the short term.

"Our industries are already rolling. If we want to revive our real sector then we cannot cut imports of industrial materials," he added. (bkm)