IMPORTED INFLATION ALSO A FACTOR
Overall, Mister Faisal of CORE Indonesia believes that offer problems are stronger contributing factors compared to high demand. This is especially true when one examines imported inflation.
Brought in inflation happens when increased prices of brought in fuels and materials result in increased manufacturing costs domestically. This in turn leads to higher prices for domestically produced goods.
Imported inflation can also be triggered by exchange rate depreciation .
This has been a problem since the finish of last year, stated Mr Faisal, citing the example of just how increases in the prices of cooking oil domestically had been triggered by higher palm oil prices globally.
“Supply problems have been taking place since the end associated with last year like issues with cooking oil, wheat and non-subsidised energy, ” said Mister Faisal.
“These are all factors which did not exist in the past seven many years. That’s why the particular inflation rate will be high now, ” he added.
Jakarta-based economist Bhima Yudhistira said that with higher prices of imported products, local manufacturers have no choice but to increase their particular prices as well.
The professional director of think tank Center of Economic and Law Studies (CELIOS) added that imported inflation is also a result of weak currency exchange.
As the rupiah weakens, imports are usually costing more.
In July, the rupiah breached the 15, 500 mark against the ALL OF US Dollar, its poorest position in two years.
It had been around 14, eight hundred against the US Money for a few weeks before reaching 15, 500 again last Friday (Aug 5).
Teacher Sri Adiningsih from Yogyakarta’s Gadjah Mada University or college said that high prices of imported food and energy affect Philippines even though the government has provided subsidies.
“Initially the effect was not experienced even though other countries were already reporting inflation rates of 8 or nine per cent …
“However, the federal government cannot safeguard everything, ” said the particular professor who specialises in international and monetary economics.
The government provides financial assistance in many areas including fuel, electricity and even rice.
The subsidies are meant to keep prices inexpensive, especially for the lower revenue people who comprise a considerable bulk of the country’s 270 million population.
When international prices soared, prices of goods in Indonesia also increased regardless of whether they are subsidised or not, Prof Adiningsih added.
For instance, the lady said that the price of essential oil internationally surged to as high as US$120 per barrel.
As a result, the government increased the price of oil and gas just for premium grades that are not subsidised. These premium grades associated with fuel are usually used by the middle and upper-income groups.
The government also increased the electricity tariffs within July for businesses and households that install circuits working at 3, five hundred volt-amperes and above. Lower-income households usually use circuits with lower voltage.
“So this particular impacts everything and Indonesia’s inflation rate accelerates, ” Prof Adiningsih mentioned.
“Especially because the rupiah has weakened. And this affects the prices associated with imported products. ”