Mays Deflation Paves The Way for Fuel Price Hike

Selasa, 04 Juni 2013 | 09:28

Statistics Indonesia noted deflation of 0.03% month-to-month in May, indicating a positive result over the government�s effort to control the supply of goods. Suryamin, Head of Statistics Indonesia (BPS), said May’s deflation was the first in last 10 years. However, it has a smaller deflation level compared to 0.1% in April.

 “The government’s effort to control the supply of goods has showed results, declining several commodities like shallot and garlic,” he said in BPS Buildings, Monday (6/3/2013).

From 66 cities in the Consumer Price Index (CPI) surveyed by BPS, around 43 cities suffered deflation and 23 cities experienced inflation.

He said the highest deflation occurred in Mataram as much as 1.03%, while the highest inflation of 2.25% was in Ambon. “Inflation in Ambon was mainly triggered by the rising price of air freight and fresh fish due to bad weather.”

In general, foodstuff was the main contributor to the deflation in May with contribution of -0.2%, tailed by clothing with -0.09%. Meanwhile, the price hike in housing, water, electricity, gas, and fuel contributed 0.18% to the inflation.

As for annual calculation, inflation rate in May reached 5.47%, while for the calendar year until May stood at 2.3% year-to-date.

Based on the components, core inflation in May reached 0.06% mtm or 3.99% yoy. Inflation rate of the government’s regulated price component was recorded at 0.96% mtm or 3.62% yoy. Meanwhile, inflation rate of volatile price component stood at -1.1% mtm or 12.06% yoy.

Responding to this price reduction, the government claimed that they are able to control food supply amid expectations of rising goods price because of the plan to increase fuel price.

Finance Minister Chatib Basri said the government’s ability to control food supply has been reflected through the deflation in May. “It has been proven effective with the existing food supply line, its supply also rose. We could suffer deflation this May,” he added. 

Best Momentum

According to him, the downward trend of goods price in the last 2 months will become the basis for the government to increase subsidized fuel price.

Chatib is also optimistic the fuel price hike impact against the increase in inflation could be maintained in the range of 2.4% until the end of the year.

As reported earlier, initially the government set inflation rate in 2013 State Budget at 4.9% which is revised in 2013 State Budget Amendment to 7.2%.

He said low inflation trend can be sustained until the end of this year if the food supply and distribution to be maintained.

Minister of Economy Affairs Hatta Rajasa believes the inflation will ranging at 7.2% which set by the government until the end of the year if the fuel price is increased.

Although there’s a potential for inflation in June as new school year and Ramadhan in the next month, Hatta is confident the prices hike will not too high because the government will maintain food supply.

 “We got reports that shallot production in June will be enough. I am not really worried if inflation in June will be high because the key is in the supply,” he said.

On the other hand, Statistics Indonesia also reported a balance of trade deficit position in January-April 2013 period amounted to US$1.85 billion. Several commodities price declines become the cause.

Suryamin said the cumulative import is higher than export. The import amounted US$61.96 billion and export valuing US$60.11 billion. “Global economic crisis causing the price of main commodities in Indonesia decreased.”

He said trade balance deficit amounting US$1.62 billion in April, while export and import respectively amounting US$14.7 billion and US$16.32 billion.

Based on BPS data, Indonesia is recorded a good surplus with US and India. Unfortunately, Indonesia still experiencing trade balance deficit with Thailand, South Korea and Japan. “The government should fix trade relations with countries that are still deficit to improve trade balance,” he explained.

Indonesia export performance in April 2013 decreased 9.11% compared with US$14.7 billion in April 2012. It’s caused by export declining in oil and gas sector to 18.37%. Despite export weakening, the volume increased.

 “It shows demand from other countries still strong. For example the volume of fats and vegetable oil rose by 14.4% and rubber 10.42%,” said Suryamin.

BPS recorded of cumulative total export in January-April 2013 reached US$60.11 billion, non oil and gas sector declined up to 3.07% year-on-year amounting US$49.57 billion. (t06/t08/aph/tw)

by Arsyad Paripurna, Sri Mas Sari, Hedwi Prihatmoko, Elok Ani Riani