"Indonesia's inflation fell from 5.51 percent at the end of 2022 to 3.08 percent in July 2023 year-on-year, one of the lowest in the world," said Bank Indonesia Governor Perry Warjiyo.
During the 2023 National Coordination Meeting (Rakornas) for Inflation Control in Jakarta on Thursday, he noted that the decline in inflation occurred in all groups, including core inflation, volatile food prices, and prices regulated by the government.
All regions also recorded a decline in inflation and were within the national inflation target, Warjiyo said.
He noted that this achievement was the result of close synergy in controlling inflation between the central and regional governments and the consistency of BI policies in central and regional inflation control teams, including the National Food Inflation Control Movement (GNPIP) in various regions.
BI estimates that inflation in 2023 will remain under control within the target of 3 percent with a margin of 1 percent, and it is even likely to be around 3 percent at the end of 2023.
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However, he reminded that the inflation still needs to be reduced to the target of 2.5 percent with a margin of 1 percent, in 2024.
"We believe low inflation is a very important factor for Indonesia's economic growth and the welfare of the Indonesian people," Warjiyo affirmed.
He highlighted that the BI continues to strengthen its policy mix in maintaining stability and supporting economic growth by coordinating with the government. Monetary policy is also consistently directed towards pro-stability to control inflation and stability of the rupiah exchange rate.
He said that loose and pro-growth macroprudential policies are carried out through large liquidity incentives reaching Rp158 trillion (around US$10,4 billion) for banks to channel credit and financing to priority sectors, including downstream agriculture, and micro, small, and medium enterprises (MSMEs) in the food sector.
The acceleration of digitalization of the payment system is also pro-growth, including expanding QRIS, distributing social assistance, and electronifying the regional financial transactions, he remarked.
QRIS (Quick Response Code Indonesian Standard) is a national standard for QR code-based payments in Indonesia.
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BI also mobilizes all of its 46 representative offices in regions across Indonesia to coordinate with local governments in controlling inflation through low-cost markets, food commodity security, cooperation between regions, smooth distribution, coordination and communication, and data digitization.
"Strengthening the GNPIP is carried out according to the characteristics of each region in Indonesia to be right on target," the governor revealed.
The central bank also estimates that inflation in 2024 will be controlled within the target range that will decrease to 2.5 percent with a margin of 1 percent.
Warjiyo noted that the effort to achieve the inflation reduction target should be accompanied by strengthening policy synergies between the central and regional governments and BI, especially to mitigate short-term disturbances, such as the impact of El Nino, supply availability, and affordability.
It must also address structural issues of inflation control, including productivity, distribution efficiency, data integration, and the strengthening of institutions and human resources, he stated.
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Translator: Martha Herlinawati S, Resinta S
Editor: Anton Santoso
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