Herman, Arnoldus Kristianus, Jakarta – Inflation in Indonesia has slowed down to the lowest level in three months in January. Most of the inflationary pressures stemmed from the rising costs, instead of recovering demand from consumers, who remain wary of spending amid the worsening Covid-19 pandemic in the country.
The Central Statistics Agency (BPS) reported on Monday that the consumer price index (CPI), which gauges the price level across the most extensive lists of goods and services in the country, rose 1.55 percent last month from the same month a year earlier. The inflation rate has slowed down from the 1.68 percent pace in December or the 1.59 percent in November.
The annual core inflation, which excludes volatile food prices and administered prices like fuel and electricity, slowed down to 1.56 percent last month, compared to 1.6 percent in December.
"The annual core inflation is slowing down, which indicates that domestic demand is still weak," Suhariyanto, BPS's head, said in a press conference on Monday.
"We know that during the Covid-19 pandemic, mobility has decreased, and the economy is moving slowly. This has an impact on [people's] income and demand," said Suhariyanto.
The government has imposed another large-scale social restriction in Java and Bali, which account for more than 70 percent of Covid-19 cases in the country, since January 8. Still, the number of new cases and deaths kept increasing, making January the worst month in Indonesia's struggle against the pandemic.
Bank Indonesia, the country's central bank, has kept its benchmark interest rate at a record low of 3.75 percent for the second straight month in January, seeking to spur consumer demand. The central bank targets inflation to be within 2-4 percent range this year.
Tempeh, tofu, and rain
Foods, beverages, and tobacco accounted for 81 percent of the inflation in January, as global trade dynamics and lousy weather disrupted supplies for several essential commodities.
Several food commodities saw their prices rose dramatically in January due to lack of supplies. Prices of tempeh and tofu rose in January, contributing 6 percent to the increase in the foods and beverage items that month, as global soybean prices jumped last month due to a spike in demand from China, BPS data showed. Indonesia relies on imported soybean to meet 70-90 percent of its domestic market.
"The increase in imported soybean prices jacked up the [tempeh and tofu] production cost," Suhariyanto said.
Other food items also saw a steep increase in January, including bird-eye chili and fresh fish. Suhariyanto said heavy rains and bad weather disrupted the food items' production and distribution as Indonesia entered wet seasons.
However, the Agriculture Ministry projected supply for the items should return to normal in February and March.