Prices on goods, services to rise due to inflation

Urip Hudiono, The Jakarta Post, Jakarta

Despite a manageable inflation of slightly below the 2004 projection, Indonesian consumers are likely to pay more for goods and services this year, according to the Central Statistics Agency (BPS).

An early surge in retail prices will be caused by severe inflation expected in Nanggroe Aceh Darussalam as a result of the Dec. 26 natural disaster and by the planned fuel price hike, BPS head Choiril Maksum said on Monday.

BPS reported 6.4 percent year-on-year inflation for December 2004, below the government target of 7 percent and higher than the 2003 figure of 5.06 percent.

Inflation reached 1.04 percent in December alone, ending the year at the peak of a three-month upward trend.

The year's inflation, Choiril said, was driven by rising prices across the board in all goods and services, particularly in residential leases and utilities, which had risen 2.04 percent over the year.

"The highest increase was in residential leases at 0.68 percent," he said.

A 1.51 percent increase in the price of basic foods also contributed to inflation in 2004, as well as a 0.31 percent rise in clothing and apparel.

A BPS survey showed that a 25 percent hike in domestic fuel prices could cause a rise in inflation of 0.37 percent to 0.56 percent, while a 65 percent fuel hike could cause a rise of 1.11 percent to 1.30 percent.

"That does not include the psychological effects of a fuel price hike," he said. "If we take that into account, it could be higher, although it probably would not reach twice as much (as the estimated inflation)."

State oil and gas company Pertamina increased in December the price of liquefied petroleum gas and high octane fuels by about 40 percent.

The price of several goods and services have increased slightly due to the fuel hike and because of news that the government would also increase domestic fuel prices to relieve the state budget from the burdensome fuel subsidy.

However, Choiril said inflation would likely rise only during the month when the fuel price hike came into effect.

He also said that the devastation in Aceh and North Sumatra would surely affect inflation, but this information would only be reflected in the agency's report.

In the aftermath of the earthquake and tsunami, the price of basic foods in Aceh have reportedly doubled due to shortages.

As with last year, the government is targeting an inflation of 6.5 percent to 7 percent for 2005.

Inflation 2002 2003 2004

Dec 1.20 0.94 1.04

Jan-Dec 10.03 5.06 6.40

Dec-Dec 10.03 5.06 6.40

Source: The Central Statistics Agency (BPS)