Jakarta – The country's 2009 inflation rate touched 2.78 percent, the lowest full year level (December-to-December) in a decade, the Central Statistics Agency (BPS) announced Monday.

"We have been trying to get the inflation level below 5 percent since the fall of New Order era and it has been accomplished now," BPS head Rusman Heriawan told a press conference at his office.

Last year's inflation was the lowest since 1999, when it fell to 2.01 percent, Rusman said. In 2008, the annual inflation was 11.06 percent.

The highest monthly inflation was in September (1.05 percent), but in December it was only 0.33 percent and 2.78 percent year-on-year.

The BPS has also recorded deflation in three months in 2009; in January at 0.07 percent, April (0.31 percent), and November (0.03 percent). Rusman said that of 66 cities surveyed, 18 showed negative levels of inflation (or deflation).

"The highest inflation is in Ambon, [in Maluku], with 3.49 percent, while the highest deflation is in Maumere [in East Nusa Tenggara] with 0.83 percent," he said.

Rusman added the low inflation level was due to falling demand following the global economic downturn. "The global economic crisis was a contributory external factor, in addition to the depreciation of the US dollar, which contributed to our low level of inflation," he said.

The prices most goods and services rose by less than 5 percent in 2009, except for foods, beverages and cigarettes which collectively rose by 7.81 percent – the highest among seven categories of goods and service measured by BPS – while clothing prices rose by 6 percent.

But transportation, communications and financial services prices fell by 3.67 percent.

"The prices of clothing, processed foods, beverages, cigarettes and tobacco were the major contributors to inflation. But this was countered by low inflation in several categories of services, resulting in an overall low rate of inflation," Rusman explained.

Acting Bank Indonesia (BI) Governor Darmin Nasution has predicted that 2009's full-year inflation would not exceed 3 percent, prompting the central bank to keep its benchmark interest rate at 6.5 percent in December last year.

Darmin said inflation this year would return to a more "normal" rate of between 4 and 6 percent.

This prediction was shared by Finance Minister Sri Mulyani Indrawati who said recently that commodity prices would rebound this year, triggering higher inflation.

She said the government had prepared measures to cushion negative impacts resulting from higher prices, including subsidies to the poor.

"Subsidies are needed to stabilize prices, from fertilizer to rice. Some administered prices like electricity and fuel will also not be changed either," Mulyani said.

According to BPS, 60 percent of inflation in Indonesia is propelled by private consumption. (bbs)