March inflation shoots up to 1.91 percent

Urip Hudiono, The Jakarta Post/Jakarta

Since the 29 percent fuel price hike on March 1, city commuters can no longer get away with giving bus conductors a mere Rp 1,000 (some 10 U.S. cents) despite their argument that they are only traveling a short distance.

No matter whether their destination is near or far, bus conductors now charge each passenger the full fare of Rp 1,200.

"If I take a public minivan, I have to pay Rp 1,400," said Sobirin, an employee who has to travel more than 20 kilometers and spends a total of Rp 5,200 from his home in Bekasi. "The conductors and drivers will grumble if I pay less."

People do not only have to allocate a larger budget for transportation, but also in food staples.

Ibu Astuti, a 43-year-old housewife, said she had to spend an extra Rp 15,000 for a 25-kilogram sack of rice that she previously bought at Rp 75,000.

"I have to bargain more often now to get the spices and vegetables I need, all for Rp 5,000," she said when shopping at Kebayoran Lama market.

The fuel price hike may be the culprit, with the Central Statistics Agency (BPS) reporting on Friday that 40 of the country's major cities experienced an average inflation of 1.91 percent in March.

"This month's inflation is indeed high. It has a lot to do with the surge in transportation costs after the recent fuel price hike," BPS head Choiril Maksum said.

The country had experienced 0.17 percent negative inflation in February.

With this month's figure, the nation-wide inflation during 2005 in the first quarter stands at 3.19 percent, more than triple the 0.91 percent in the same period in 2004.

The country has never seen such a high monthly inflation rate since the 1.99 percent in January 2002, when the government hiked domestic fuel prices by an average of 22 percent.

March's on-year inflation, meanwhile, stood at 8.81 percent, exceeding both 2004's 5.11 percent and the government's year-long inflation rate target of 7.5 percent for this year.

Choiril said the prices of all goods and services in the country had shot up following the fuel price hike, led by transportation costs which rocketed by 10.03 percent, compared to 0.10 percent the previous month.

After the increase in the transportation costs were a 1.62 percent rise in prices of processed food, 0.64 percent in clothing and 0.59 percent for health services.

Choiril said March's inflation was still in line with BPS estimations and the rate could still level out by the end of the year. "It depends greatly on the government's action plan to curb the rising inflation."

BPS estimated last month that a price hike in Premium gasoline and diesel fuel would push up the inflation rate by 0.6 percent and 0.02 percent respectively. But many analysts have estimated that the fuel price hike could cause an increase in inflation by up to 2 percent.

Bank Indonesia recently said it would be more aggressive in raising its benchmark interest rates to prevent runaway inflation.

A rise in inflation would lead to weakening purchasing power, and possibly lead to a weakening of the economy as domestic consumption still makes up some 70 percent of gross domestic product (GDP). High inflation would also prompt banks to adjust upward their lending rates, making loans for the private sector more expensive.

All in all, prices have risen and are unlikely to come down.

Sobirin only hopes that his office will consider raising his transportation stipend, and perhaps his monthly salary as well.

Astuti, meanwhile, said her family would just have to cut down on spending. "There'll probably be less chicken or beef on our table."