Inflation rate to stay below 10 %: Mar'ie
Inflation rate to stay below 10 %: Mar'ie
JAKARTA (JP): Minister of Finance Mar'ie Muhammad expressed confidence yesterday that the inflation rate would not break the double digit level this year despite the recent rises in the prices of housing materials and foodstuffs.
"I am optimistic this year's inflation rate will remain at one digit," he told reporters, dismissing fears over the possible increase in the inflation rate to above 10 percent.
The minister, however, refused to further comment when he was asked about the reasons behind his optimistic outlook on the country's inflation rate, which slightly dropped to 9.24 percent last year from 9.77 percent in 1993.
Economists expressed concern that the recent increase in cement prices would undermine the government's effort to check the inflation rate at below the psychological barrier of 10 percent this year.
The economists estimated that the inflationary pressure would further strengthen in the coming years as the impact of the rise in cement prices is felt, which would automatically push prices of other housing materials.
The increase in retail prices of sugar caused by the rise in the factory prices set by the government early this week could also fuel price hikes of other foodstuffs, they said of their fears.
"This will further undermine the inflation," said the outspoken Kwik Kian Gie, who chairs the research and development bureau of the Indonesian Democratic Party.
The monthly inflation rate dropped to 0.5 percent in March from 1.31 percent in February and 1.16 percent in January, partly due to a drop in housing prices.
Like the economists, the chairman of the Central Bureau of Statistics, Soegito, also expressed his concern over the mounting inflationary pressure.
Wages
In addition to the surge in the prices of cement and sugar, this month's increase in the minimum wages of workers would also give further pressure to the country's inflation rate, Soegito said.
Bank Indonesia Governor Soedradjad J. Djiwandono gave no indication of any measures to curb the stronger inflationary pressure but he said the central bank has already anticipated the price hike through its monetary instruments.
After delivering his speech at the ninth Expert-level Conference on Islamic Banking, the central bank governor said yesterday that the government has done its best to cool down the inflationary pressure by balancing the supply and demand sides.
In the monetary sector, the central bank has set a moderate target in the money supply as part of the approaches in curbing the inflationary pressure, he said.
"In the micro sector, we hope commercial banks will strictly adopt guidelines set by the monetary authority," he said in reference to the central bank's appeal to slow down lending expansion in the inflation sensitive sectors, such as the property business.
The government has, in fact, set the inflation target at five percent per annum under its current Five Year Development Plan (Repelita VI), but most economists described the inflation projection as unrealistic.
The inflation rate was recorded at 9.53 percent in both 1990 and 1991 before falling to 4.53 percent in 1992. It surged back in 1993 to 9.77 percent and reached 9.24 percent in 1994.
The Manila-based Asian Development Bank projected in its latest annual outlook that Indonesia's inflation rate will likely drop to 7.8 percent this year and reach 7.6 percent next year. (hen)