March inflation eases, but threat remains

March inflation eases, but threat remains

Dadan Wijaksana, The Jakarta Post, Jakarta

The Central Bureau of Statistics (BPS) reported on Monday that
inflation eased slightly in March, but warned that high
inflationary pressures remained a threat, particularly following
the latest fuel price hike.

The BPS said that prices as measured by the consumer price
index (CPI) were down 0.02 percent from the previous month's
level. The monthly inflation rate in February was 1.5 percent.

The bureau said that on an annualized basis, inflation in
March was running at 14.08 percent, down from 15.15 percent the
previous month.

BPS chief Soedarti Surbakti said that the lower inflation in
March was due to the good rice harvest and improvements in the
distribution of basic goods.

Severe floods, particularly in the Greater Jakarta area during
the previous month, had disrupted the distribution of goods and
contributed to the high rate of inflation in February.

But Soedarti said that the latest fuel price hike would
trigger inflationary pressure this month.

State-owned oil and gas firm Pertamina has raised the prices
of most fuels for public and industry consumption this month
following a rise in global crude oil prices.

Fuel prices are adjusted monthly in accordance with
international price movements.

A higher inflation rate in April would pose an uphill
challenge for the government in meeting its single-digit target
for this year.

While the government has forecast inflation at nine percent
this year, the cumulative figure after three months already
stands at 3.5 percent.

Controlling inflation is crucial to protecting people's real
earnings, which have already been badly hit by the prolonged
economic crisis.

Lower inflation will also allow the central bank to further
cut its benchmark interest rate, which in turn will reduce the
burden on the state budget in covering the interest on the
massive amount of government bonds that have been issued in
recent years.

The BPS said that food prices in March were down 2.82 percent
month-on-month, processed food up by 0.18 percent, transportation
and communications costs up 4.47 percent, housing up 0.86
percent, clothing down 0.13 percent, healthcare costs up 0.59
percent, and education, recreation and sport up 0.33 percent.

Elsewhere, the bureau also announced improved trade figures,
with exports in February showing their best monthly performance
since October as imports also continued to increase.

Exports in February increased 4.36 percent to US$4.18 billion
from $4 billion in January. Meanwhile, imports rose by 4.74
percent to $1.98 billion from $1.89 billion.

That left a trade surplus of $2.2 billion in February, up from
$2.1 billion the previous month.

Meanwhile, total exports after two months reached $8.18
billion, down from $9.13 billion a year earlier, while imports
fell to $3.87 billion from $6.12 billion a year earlier.

"The stronger exports in February can be attributed to the
(recovery in the) U.S. and Japanese economies," Soedarti
explained, adding that exports to the two countries recorded an
increase over the previous month.

Citibank economist Anton Gunawan concurred, saying that the
recovery in both the U.S. and Japan was moving ahead faster than
previously expected.

"Their faster-than-expected economic recovery is helping boost
trading performances in export-oriented Asia, including
Indonesia," Anton said.

He said that the better trade figures were a good signal for
the economy.

"These are positive signals for the country, showing that the
wheels of the economy are moving," Anton told The Jakarta Post.

However, the country's total exports throughout the year,
Anton went on, would probably stand at between $54 billion and
$55 billion, lower than the $56 billion recorded in 2001.