Indonesia is facing a challenging inflationary period with inflation rates expected to remain above 5% through the first half of 2023, according to central bank governor Perry Warjiyo. However, inflation is anticipated to decrease to below 4% in the latter half of the year. The persistent high inflation is primarily driven by elevated food prices.
Governor Warjiyo emphasized the need for continued vigilance and proactive measures to manage inflation, particularly food inflation.
During an event in Makassar, South Sulawesi, he urged local authorities to collaborate closely with the central government to mitigate inflationary pressures.
With inflation predicted to stay above 5% in the first half of 2023, Indonesia braces for further price increases due to anticipated dry weather and high demand during Ramadan.Recent data shows Indonesia’s Consumer Price Index increased by 5.47% year-on-year in February, with notable price hikes in fuel, rice, cigarettes, and air travel.
Despite a surprising slowdown in core inflation to 3.09%, food prices, especially for rice and cooking oil, have surged in most provinces. This trend is expected to continue as demand rises in anticipation of Ramadan and the Eid al-Fitr festival.
Adding to the inflationary concerns, the El Niño weather phenomenon is forecasted to cause drier conditions in Indonesia. This weather pattern, resulting from the warming of Eastern Pacific Ocean waters, is likely to diminish food production later this year, exerting further upward pressure on prices.
The convergence of high food demand and adverse weather conditions underscores the need for a coordinated effort to stabilize inflation and safeguard economic stability.