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Indonesia braces for higher inflation as Covid rages on

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Workers making tofu from soya beans at a factory in Surabaya on January 20. AFP

Indonesia braces for higher inflation as Covid rages on

Indonesia is expecting higher inflation after long periods of relatively stable prices under President Joko “Jokowi” Widodo.

Signs of an uptrend were confirmed by the country’s statistics agency on February 2, when it announced that the annualised inflation rate in January was 2.18 per cent, the highest since May 2020, with food, housing and household equipment being the main drivers. In 2021, inflation was 1.87 per cent.

“Rises in the price of commodities and various food due to wetter weather [that affected harvests] contributed to the higher inflation,” head of the fiscal policy office at the finance ministry Febrio Kacaribu said on February 3 when he commented on the January figure.

He also underlined that recovering consumer demand following the easing of Covid-19 restrictions had pushed prices up.

Febrio said the government was trying to keep the situation under control by, among other things, making domestic energy prices, including petrol, affordable at home.

Crude oil prices have jumped, but the Indonesian government has partially absorbed the increase in prices to ensure petrol remains affordable at home. Critics said this ran counter to the president’s pledge early in his tenure that such prices would be left to the international market so as not to put pressure on state coffers.

Widodo’s administration, which took office in 2014, has thus far been credited for curbing inflation, primarily by intervening in the market and addressing inefficiencies in logistics in the sprawling archipelago.

Indonesia’s average annual inflation was 4.6 per cent between 2009 and 2020, a sharp improvement from the 9.5 per cent between 2001 and 2008.

Widodo’s administration has issued no fewer than 12 regulations stipulating price caps on food, which is a sensitive issue. Many in the country of 270 million people spend more than half of their expendable income on food, and runaway prices, if not addressed properly, could lead to political instability.

The government under Widodo has also worked to improve distribution in the country, building a total of 1,298km of toll roads in his first five-year term through to 2019, data from the public works ministry showed. In 2020, about 250km was built, and in 2021, about 300km. Between 1978 and 2014, only 795km was built.

On February 4, the president inaugurated a new toll road in North Sumatra and, in a live broadcast, said that it would allow orange growers in a village nearby to slash their transportation costs by 75 per cent, making it easier for their products to compete with imports.

THE STRAITS TIMES (SINGAPORE)/ASIA NEWS NETWORK

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