Tsunami pushes Aceh January inflation to 7.02 percent

The Jakarta Post, Jakarta

The recent giant tsunami in Aceh have not only lifted boats onto roofs but also the prices of basic foods in the area.

The food price increase propped-up January 2005's inflation rate in its capital city of Banda Aceh to 7.02 percent, by far higher than the nationwide inflation rate of 1.43 percent, as revealed on Tuesday by the Central Statistics Agency (BPS).

With supply of foods lacking, "people in Aceh have been trying to find substitutions to commodities unavailable at the moment such as fish," BPS's Director of Price and Financial Statistics Ali Rosidi told a press briefing.

He explained that the lacking of commonly consumed commodities has risen the price of the substitutes, which in turn pushed up the prices of other basic needs as well.

Aceh province is the hardest hit by the powerful earthquake- triggered tsunamies struck the region on Dec. 26, rampaging the area with death tolls reaching so far 109,000 as of Tuesday.

But, with relief supports pouring in to the area, which should eventually secure basic foods supply, Ali was upbeat that the raising inflation trend would only be temporary and that the rate would soon return to normal.

Nation-wide, the 1.43 percent January inflation was largely attributable to price hike in basic foods, housing and utilities across the country.

"The highest increase of 3.11 percent was recorded for the price of basic foods," said Ali. While prices of housing and utilities rose by 1.48 percent.

On-year January inflation stood at 7.32 percent, exceeding the 2003's January's 4.82 percent.

In the past two years, this month's inflation was the highest, raising concerns that full-year's accumulative inflation would exceed the targeted rate of 6.5 to 7 percent.

A pick up in inflation will lead to the decreasing purchasing power. This will then affect national consumer spending -- a prerequisite to the robust domestic consumption, which has since the crisis become the backbone of the nation's gross domestic products (GDP) growth.

At present, domestic consumption makes up about 70 percent of the GDP, with investment and net-exports contributing the rest.

High inflation would also give leeway for Bank Indonesia to raise its benchmark interest rate (SBI), a bad sign for the economy as it would prompt banks to adjust upward their lending rates and make loans more expensive for the private sector.

January Inflation 2003 2004 2005

on month 0.80 0.57 1.43

on year 8.74 4.82 7.32

Source: BPS