RI`s economy under threat of high external inflation: economist
Jakarta (ANTARA News) - The Indonesian economy is expected to be under a threat of high external inflation this year due to a surge in the global crude and food prices, an economist said.
The threat had been noticeable now following a recent increase in the prices of several food commodities in the global market, Martin Pangabean of state-owned Bank Mandiri said in an "Economic Outlook 2008" report here on Tuesday.
"Countries in all parts of the world, except Indonesia, saw their year-on-year inflation rate in February 2008 climbing by five- to ten-fold from a year earlier," he said.
Domestic inflation pressures would be caused by at least three factors -- global food prices, the rupiah`s exchange rate against the dollar, and the pressures of global crude price spiral on the state budget, he noted.
Based on the bank`s forecast, although the rupiah`s exchange rate against the dollar currently reached a reasonable level of Rp9,258 a dollar it still had the potential of weakening against the greenback, he said.
The rupiah`s weakeness would be caused by the likely constant prices of the country`s export commodities while the prices of imported commodities had been on the increase, he said.
Investor expectations of the rupiah`s exchange rate to average Rp9,500 a dollar throughout this year would put a further strain on the inflation rate, he said.
The other pressure on the inflation rate would come from the surging global crude prices expected to hover above US$100 per barrel this year, he said.
"By April 18, ICP (Indonesian crude prices) already approached US$100 a barrel. If the government introduces a so-called "smart card" or raises the prices of octane to Rp5,500 per liter, this will lead to a rise in the retail prices of fuel oil," he said.
Judging by latest developments in the inflation rate, he predicted the core inflation, which excludes volatile food prices and administered fuel prices would continue to push up to 9 percent at the end of this year.
After all, the core inflation would fall throughout next year, if the movement of the rupiah`s exchange rate against the dollar and energy global prices returned to normal, he said.(*)
The threat had been noticeable now following a recent increase in the prices of several food commodities in the global market, Martin Pangabean of state-owned Bank Mandiri said in an "Economic Outlook 2008" report here on Tuesday.
"Countries in all parts of the world, except Indonesia, saw their year-on-year inflation rate in February 2008 climbing by five- to ten-fold from a year earlier," he said.
Domestic inflation pressures would be caused by at least three factors -- global food prices, the rupiah`s exchange rate against the dollar, and the pressures of global crude price spiral on the state budget, he noted.
Based on the bank`s forecast, although the rupiah`s exchange rate against the dollar currently reached a reasonable level of Rp9,258 a dollar it still had the potential of weakening against the greenback, he said.
The rupiah`s weakeness would be caused by the likely constant prices of the country`s export commodities while the prices of imported commodities had been on the increase, he said.
Investor expectations of the rupiah`s exchange rate to average Rp9,500 a dollar throughout this year would put a further strain on the inflation rate, he said.
The other pressure on the inflation rate would come from the surging global crude prices expected to hover above US$100 per barrel this year, he said.
"By April 18, ICP (Indonesian crude prices) already approached US$100 a barrel. If the government introduces a so-called "smart card" or raises the prices of octane to Rp5,500 per liter, this will lead to a rise in the retail prices of fuel oil," he said.
Judging by latest developments in the inflation rate, he predicted the core inflation, which excludes volatile food prices and administered fuel prices would continue to push up to 9 percent at the end of this year.
After all, the core inflation would fall throughout next year, if the movement of the rupiah`s exchange rate against the dollar and energy global prices returned to normal, he said.(*)