Inflation up in September as rupiah falls

Inflation up in September as rupiah falls

Adianto P. Simamora, The Jakarta Post, Jakarta

Inflation was up in September due to a decline in the value of
the rupiah, raising concerns that the government's 2001 single
digit inflation target may not be met.

The Central Bureau of Statistics (BPS) announced Monday that
the consumer price index rose 0.64 percent month-on-month in
September, compared to the deflation of 0.21 percent recorded in
August.

The agency said that year-on-year inflation during the month
reached 13.01 percent compared to 12.23 percent in the previous
month.

While most prices increased during the month, food prices fell
by 0.73 percent, the BPS said.

"The rises were primarily caused by an increase in the price
of goods and services," BPS deputy officer for statistics and the
economy Slamet Mukeno said at a media briefing.

Economists have said that the drop in the value of the rupiah
against the U.S. dollar will push prices upward particularly as
the country's production system is still heavily dependent on
imported raw materials.

The rupiah weakened to around Rp 10,000 per dollar last month
as corporations purchased hard currency amid growing anti-U.S.
protests in the country.

Economists said that with inflation over the next few months
likely to remain high, the government may fail to cap this year's
inflation level at the targeted figure of around 9.3 percent.

"It will be very difficult for the government to meet such an
inflation target in the remaining three months of this year," PT
Danareksa Securities senior economist Raden Pardede told The
Jakarta Post.

"Annual inflation this year may hit 11 percent," he added.

Raden explained that inflationary pressure over the remaining
period of the year would come from the year-end festivities, the
government plan to raise electricity charges this month, and
continuing pressure on the rupiah.

Maintaining single digit inflation is seen as a crucial factor
in helping to revive confidence in the ailing economy and
currency.

The prospect of higher inflation would also prevent the
central bank from lowering interest rates, a move which is badly
needed to reinvigorate the business sector.

Slamet also said that inflation over the next three months
would likely go higher, although he declined to say whether the
government's 2001 target was still within reach.

"Based on past experience, prices usually move higher by up to
three percent in the October-December period," he said

"The year-end festivities such as Christmas and the Muslim
fasting month, as well Idul Fitri (post-fasting month holiday),
will all serve to push inflation higher," he explained.

Elsewhere, the BPS also reported that exports rose by 4.4
percent in August to US$5.06 billion from the previous month's
$4.83 billion on the back of an increase in non-oil and gas
exports.

"Non-oil and gas exports increased to $4.13 billion in August
from $3.77 billion in the previous month, while oil and gas
exports declined 13.6 percent to $925 million from $1.07
billion," the BPS said in the report.

He said the decline in oil and gas exports was due to a fall
in crude oil and gas exports.

"The decline in crude oil exports was on the back of a mild
correction in the price of Indonesian crude oil on the
international market to $24.36 per barrel in August from $24.70
in July," Mukena said.

The Bureau said that during the eight months to August, the
value of exports reached $39.25 billion as against $40.32 billion
a year earlier, of which non-oil and gas exports accounted for
$30.26 billion as against $31.32 billion in the previous year,
and oil and gas exports $8.99 billion as against $8.99 billion.

The U.S. remained Indonesia's biggest export destination,
followed by Japan and Singapore.

Total exports to the U.S. reached $652.7 million as against
$622.9 million in July,

Meanwhile, exports to Japan totaled $639.7 million as against
$560.9 million the previous year, and exports to Singapore $467.1
million as against $384.4 million.

Slamet said, however, that the country's exports to the U.S.
over the following months could be lower following the recent
terrorist attacks on New York and Washington.

"Under normal conditions, exports to the U.S. are usually
higher in September than in August as U.S. demand for textiles
and shoes rises on seasonal factors such as the onset of winter
and ahead of Christmas," he said.

"But as the situation is not normal following the Sep. 11
attacks on the World Trade Center, I am afraid that our exports
to the U.S. will fall significantly," he said.