"The domestic inflation rate is expected to be maintained to keep people's purchasing power," Head of the Fiscal Policy Agency (BKF) of the Finance Ministry Febrio Kacaribu said in Jakarta on Friday.
The government has increased the allocation of subsidies and compensations in the 2022 state budget so it could act as a strong shock absorber and minimize the impact of rising global energy and food commodity prices, he noted.
This step is very important for sustaining Indonesia's economic recovery, which is still in the early stages, Kacaribu added.
Meanwhile, the inflation rate continued to grow in May 2022 to reach 3.55 percent from 3.47 percent in April. The level seen in May was the highest on record since December 2017.
"This was caused by global commodity price pressures and the impact of the increase in demand for Eid," Kacaribu said.
Month-on-month, inflation dropped to 0.4 percent from 0.95 percent in April 2022, with food commodities making the largest contribution.
Then, core inflation, which dipped slightly to 2.58 percent (yoy) from 2.6 percent in April, was driven by an increase in people's purchasing power amid the impact of rising global commodity prices.
Specifically, there was an increase in service commodities inflation, such as for recreation and restaurant services. Food commodities such as fresh fish and sweet bread also experienced an increase in inflation.
Meanwhile, there was a slowdown in inflation for clothing and personal care as demand normalized after spiking during Eid al-Fitr.
Further, volatile food price inflation grew to 6.05 percent (yoy) from 5.48 percent in April.
Some food commodities, such as eggs and chicken meat, experienced a spike in prices due to an increase in the price of feed as supply from production centers dried up.
Related news: People's purchasing power yet to recover in Jakarta: BPS
Meanwhile, the policy banning crude palm oil (CPO) exports, supported by better distribution control, helped drive down cooking oil prices.
However, Kacaribu said that Indonesia needs to remain alert during the wet-dry season, which causes a decrease in the productivity of various chili peppers and an increase in fertilizer prices. This could push the prices of general food items up in line with the restrictions on exports of food and fertilizers in 10 countries.
Inflation prices regulated by the government, or administered prices, remained steady at 4.83 percent (yoy) in May 2022.
Airfare contributed the most to inflation, in line with the homecoming rush during Eid al-Fitr in May. Apart from the increase in demand, the increase in tariff was also influenced by adjustments due to an increase in production costs.
Related news: State Budget becomes shock absorber to manage purchasing power: Gov't
Translator: Astrid Faidlatul H, Resinta S
Editor: Rahmad Nasution
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