Indonesians hit hard by rising inflation and soaring prices of essential goods

Indonesia's latest inflation data points to risks faced by the country in its post-pandemic economic recovery. - AFP

JAKARTA, May 14 (The Straits Times/ANN): Indonesian garment factory worker Praptiani has been hit hard by surging prices.

The mother of two has had to pay more for everything from cooking oil, whose price has doubled from late last year due to a scarce supply, to detergent and dishwashing liquid, whose prices have surged since April due to a value-added tax hike from 10 per cent to 11 per cent.

April was especially tough for Ms Praptiani, as the tax hike came amid the price of octane 92 Pertama gasoline rising by nearly 40 per cent.

Ms Praptiani, 43, who rides a motorbike to her workplace in Tangerang, Banten, some 30km from her house in the same regency, told The Straits Times: "The transportation costs of my whole family soar, while my wage remains stagnant.

"It is really burdening me. I was still adapting to the fuel price increase, but then, the tax rise took effect and affected most of my daily needs."

The price upticks have not only made her spending balloon, but also eroded her purchasing power as a consumer.

"With 100,000 rupiah (S$9.50), I used to be able to buy quite many necessary items. But now when I go shopping, I can't get as many," she said.

Indonesia's latest inflation data points to risks faced by the country in its post-pandemic economic recovery, as high inflation may hurt the purchasing power of millions of consumers like Ms Praptiani and push the central bank to tighten its monetary stance.

Indonesia's consumer price index was up 3.47 per cent year-on-year in April, the highest since August 2019, exceeding the consensus forecast of 3.3 per cent.

The monthly inflation was mostly triggered by rising prices of food - including cooking oil, chicken and fish - gasoline and air tickets. And this rise coincided with the Ramadan fasting month.

South-East Asia's economy grew by 5.01 per cent year-on-year in the first quarter of this year, marginally lower than the 5.02 per cent in the previous quarter, on the back of greater exports and stronger domestic consumption, primarily from the easing of Covid-19 restrictions.

Economists from Jakarta-based securities firm Bahana Sekuritas said that with the latest gross domestic product data showing both consumption and investment expanded by 4 per cent year-on-year, Bank of Indonesia (BI) will be "focused on the weak economy rather than surging inflation".

"Note that interest rate can affect only demand (core inflation), but much of our inflationary problem today is influenced by supply and one-off increase in administered energy prices," they wrote in a research note on April 9.

"There is still room for a steady BI rate this year because bringing down inflation by destructing demand is not a policy option that BI finds favourable, in our view."

Mr Mukroni, who leads the association of Indonesian traditional food stalls, told ST that it has tried not to raise the prices of cooked food, even as the prices of raw materials - especially cooking oil, tempe (soya bean cake) and eggs - rose, as it was aware of and tolerated customers' dwindling purchasing power, which could affect demand.

"To cope with the situation, we just reduce the portion of food we put on their plates," he said.

Food stalls have reaped lower profits, dropping from 50 per cent of the food's prices to only 20 per cent to 30 per cent, said Mr Mukroni, who runs two food stalls in Bekasi, West Java.

But he said: "It is okay to gain little profit. The most important thing for us is to be able to keep selling food, while our customers continue to buy it."

Indonesia, the world's largest producer of palm oil, has struggled with a cooking oil crisis since last November as producers boost exports amid its soaring prices in the global market.

The government has issued a number of policies to bring down its price, including a ban on palm oil exports since late April. Yet prices still could not be brought down to the desired level of 14,000 rupiah a litre. One litre of cooking oil is currently selling for around 20,000 rupiah.

The ballooning cooking oil price has driven Jakarta-based producers of crackers, locally known as kerupuk, to double their price to 2,000 rupiah apiece from May 6.

Made from fish, prawn or tapioca starch, the deep-fried crunchy snack is complementary to various Indonesian dishes, such as nasi goreng (fried rice) and soto (coconut milk soup with diced meat).

"The sharp price increase of cooking oil was the climax of all raw material price surges that we had endured for quite a long time," Mr Elfin, who owns a kerupuk factory in South Jakarta, told ST, referring to the price hikes in tapioca starch, garlic, salt and canned fish.

To deal with the price shock and cater to different customers' preferences, his factory, which makes 5,000 pieces of crackers a day, now sells kerupuk in two sizes - small and large.

OCBC Bank economist Wellian Wiranto wrote on April 19: "While the price level of kerupuk itself - despite its massive 100 per cent increase - is not going to rock Indonesia's headline inflation print in and of its own, it is emblematic of the risk that the inflation expectations of ordinary folks going about their ordinary daily lives eating their ordinary food items may get jolted because of extraordinary price increases."

Ms Praptiani said: "Hopefully the government can curb prices, apart from issuing policies that can lower prices, so that circulating goods are sold at prices that match our purchasing power." - The Straits Times/ANN

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