Indonesia records lowest inflation in history as Covid-19 ravages country; total almost at 780,000

Shoppers buy fresh chili at Peunayong traditional market in Aceh. Indonesia recorded the lowest annual inflation in the country’s history in 2020. - THe Jakarta Post/Asian News Network

JAKARTA, Jan 4 (Jakarta Post/ANN): Indonesia recorded the lowest annual inflation in the country’s history in 2020 as the coronavirus pandemic ravaged the economy and battered purchasing power. As of Tuesday, total Covid-19 cases in Indonesia were at almost 780,000.

The country’s annual consumer price index (CPI) stood at 1.68 percent last year as prices advanced 0.45 percent on a monthly basis in December, Statistics Indonesia (BPS) announced on Monday (Jan 4).

The figure is the lowest full year number in history and below Bank Indonesia’s (BI) target range of 2 to 4 percent last year.

While a low inflation rate is good for an economy as it means consumers can buy goods and services at affordable prices, the low figure in Indonesia last year indicates weakening purchasing power rather than balanced supply and demand.

Annual core inflation, which excludes volatile food and government administered prices, fell for nine consecutive months last year up to December to 1.6 per cent, a level unseen since the BPS began recording the indicator in 2004, signaling weakening demand and purchasing power.

Weak demand is feared to slow business and manufacturing activity while posing a risk to the entire economy, of which consumption makes up more than half.

“The dip in core inflation showed that demand remained weak,” Bank Danamon economist Wisnu Wardana wrote in a note on Monday.

“The 2020 [year-end holiday] festivities did not help push up core inflation as the government imposed tighter restrictions during Christmas and New Year.”

Indonesia usually sees household spending increase in the last month of the year, but core inflation in December fell slightly to 0.05 percent from 0.06 percent in November, although the headline inflation reached the highest rate since June 2019, when consumption picked up due to the Ramadan and Idul Fitri festivities.

Higher prices of red chili, purebred chicken eggs and airfares, among other products, boosted the CPI amid seasonal effects.

Prices of personal goods and other services rose 5.8 percent year-on-year (yoy) last year, the highest among other components, driven by higher gold jewelry prices as the uncertainty surrounding the pandemic prompted people to turn to safe-haven assets.

The food, beverage and tobacco component recorded 3.63 percent inflation because of higher prices of red chili, cooking oil and filter clove cigarettes, among other things.

Healthcare prices, meanwhile, rose 2.79 percent in 2020. Economists expect inflation to hike to near 3 per cent and within the central bank’s target range in 2021 as economic activity and consumer demand recover.

Meanwhile, The Covid-19 cases in Indonesia rose by 7,445 within one day to 779,548, with the death toll adding by 198 to 23,109, the Health Ministry said on Tuesday (Jan 5).

According to the ministry, 6,643 more people were discharged from hospitals, bringing the total number of recovered patients to 645,746. The virus has spread to all the country's 34 provinces.

Since Monday evening, Jakarta recorded 1,824 new cases, West Java 1,100, Central Java 996, East Java 727 and South Sulawesi 639.

Fourteen more Indonesians overseas have tested positive for Covid-19, bringing the total cases to 2,697, according to the Indonesian Foreign Ministry on Tuesday.

Of the new cases, eight were reported in the United Arab Emirates, five in South Korea, and one in Britain.

In addition, 12 more Indonesians abroad have recovered from Covid-19, bringing the total recoveries to 1,872.

Meanwhile, 658 Indonesians in foreign countries are still under medical treatment and the death toll remains at 167.

The highest number of Indonesians overseas contracting Covid-19 is recorded in Saudi Arabia (270), followed by Qatar (188), Singapore (281), Kuwait (170), and Malaysia (168). - The Jakarta Post/Asian News Network

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