Mantik Kusjanto, Jakarta – Indonesia in July posted its second highest monthly inflation rate this year with prices jumping 68.72 percent on a year-on-year basis as latest figures showed a further slowdown in trade.
"The economy is still declining judging from import figures. I don't believe the economy has bottomed out," said Vincent Low, fixed-income strategist with Merrill Lynch. "I think Indonesia is also in for a period of very high inflation."
Central Statistics Bureau chief Sugito Suwito said month-on-month inflation in July was 8.56 percent against 4.64 percent in June, raising the year-on-year inflation to 68.72 percent last month. "This was the second highest inflation in seven months after 12.67 percent last February," Suwito said. "But we still have time to push prices down in the remaining five months," he said. Rises in food prices were mainly responsible for the sharp increase, he added.
Suwito said imports in the first five months fell 38 percent from the same period last year to $11.06 billion, with non-oil imports down 39.6 percent and oil falling 22 percent. "We can't import because of rising dollars," he said.
Indonesia is struggling through its worst economic crisis in decades, with the rupiah currency down more than 80 percent in value against the dollar since July last year. It was trading at around 13,100 in Jakarta on Monday. The Jakarta Stock Exchange composite index was down 1.34 percent on the day to end at 475.26 points on falls in most regional markets and a weakening yen, brokers said.
Exports in the January-May period totalled $20.11 billion, a drop of 4.9 percent from the same 1997 period, with non-oil exports amounting to $16.67 billion. Suwito said non-oil exports rose 4.3 percent while oil-and gas-exports fell 33.4 percent in the five-month comparison.
Following the agency's monthly statistics, food and processed food contributed to more than half the 8.56 percent increase in the July inflation rate. Suwito said the agency was sticking to its initial inflation forecast of 80 percent for this calendar year because the country had just secured $14 billion of fresh funds from international institutions and donor countries.
"We are still using the 80 percent target after (Chief Economics Minister) Ginandjar Kartasasmita secured a $14 billion loan for this fiscal year (ending March)," he said. "It's a sufficient amount to revive the economy." Low said the forecast of 80 percent remained realistic.
Analysts have been cautious over Indonesia's recovery potential despite the infusion of fresh capital because of the damage to investor confidence by riots in May which helped topple former president Suharto after 32 years in power. The World Bank has estimated it would take at least until 2005 for per capita income to recover to its pre-crisis level.