Inflation may reach double digits

JAKARTA (JP): The country's inflation rate could break the double digit barrier this year if the government does not take extra measures to facilitate the supply of goods and services, chief of the Central Bureau of Statistics, Sugito, warned yesterday.

Sugito said month-on-month inflation rates were increasing especially after the outbreak of the currency crisis last July.

"I hope there will be an extra effort to curb inflation this month because the month-on-month inflation rates for September, October and November were already high," Sugito said.

The month-on-month inflation rate was recorded at 1.29 percent for September and 1.99 percent for October -- the highest monthly increase in the last 10 years.

Inflation from January to October this year was already 7.36 percent, compared to only 5.35 percent for the same period in 1996.

The month-on-month inflation figure for November was not yet available, but is expected to be announced during a monthly cabinet meeting tomorrow.

Sugito said inflation for November was quite high although not as high as the October figure.

To remain at single digit inflation rates, Sugito said, the month-on-month inflation rate for December should be below 1 percent.

"Based on experience, the month-on-month inflation rate for December never reached 1 percent for the last 10 years. The highest was only 0.79 percent.

"So, it is not impossible to press inflation to below 1 percent for this month. It only needs an extra effort from everybody in charge, especially those in the food sector," Sugito said.

The culprit behind the staggering month-on-month inflation rates for the last three months was increasing food prices, as a result of the long drought and currency crisis, Sugito said.

"Despite the crisis, people would still buy basic staple foods. Therefore, once the supply was not steady, prices could go up easily," Sugito said.

"If we seriously take care of the food problem caused by the drought, I predict inflation will not reach 10 percent," he said.

But if food prices continued to rise this month, especially because of the nearing Chinese New Year and Islamic fasting month, year-on-year inflation could break the psychological barrier of 10 percent.

He suggested that the National Logistics Agency (Bulog) release its stocks of rice to halt the current increase of rice prices.

If its rice stocks were being depleted, Bulog should start importing the commodity for the sake of the public, he said.

"It's up to Bulog because it is the one which knows exactly when to release its buffer stocks to the market. My concern is about the price -- how to stop price increases," Sugito said.

As for non-food products, Sugito said, the government could still influence the demand side by tightening liquidity.

"When people have no money on hand, they delay their consumption of luxury goods like cars," Sugito said.

He compared the current crisis to a similar one in 1991, when the country's economy was affected by a long drought and a tight monetary policy. The crisis did not affect the inflation rate then, he said.

During the 1991 drought, the inflation rate in the fourth quarter was 2.01 percent, he said. (rid)