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Should I still invest? Jakartans ponder response to inflation

Jakarta Post - October 9, 2022

Fadhil Haidar Sulaeman, Jakarta – Akhmad from Jakarta felt euphoric when activity restrictions imposed in response to the COVID-19 pandemic were lifted early this year. For the 23-year-old researcher, the relaxed rules for travel, entertainment and commerce marked the beginning of a spending spree.

Cash was not a problem for him, as the restrictions caused him to stay at home more often, and therefore save more money, especially because of lower transportation expenses. He began to visit unique places in the capital that were trending on social media, and the peak of his consumption fiesta was the Idul Fitri holiday period, when he went to his hometown in Central Java.

After the government told people in 2020 and 2021 to refrain from the traditional journeys to their places of origin because of the pandemic, 2022 saw tens of millions hit the road in a phenomenon that has become known as "revenge travel", providing a massive boost to consumption.

Akhmad found he still had some money left over to put away for a rainy day, and – heeding advice he found online about the need to invest for a better future – he decided to do just that, opting for blue chip stocks.

"Those were the good times; they said the economy was doing great and everything was going to be normal, but suddenly prices began to rise, and I don't think that's normal," Akhmad told The Jakarta Post on Sept. 30.

Akhmad noticed prices rising faster than usual around the middle of the year, and faster yet in recent weeks, as the government increased fuel prices, which then fed through to ride-hailing fees.

In response, he slashed his recreational spending and liquidated some investments.

Tejo, a 25-year-old consultant earning an above-average Rp 8 million (US$526) per month, feels that, although his spending increased significantly over the past year, inflation has "substantially affected" the way he spends and made him cautious of transportation expenses.

He now finds himself forking out much more than planned on fuel and ride-hailing services, and particularly for food-delivery services, which cost him around 40 percent more than a year ago.

To limit the burden on the state budget, the Indonesian government raised the prices of subsidized and some unsubsidized fuel sold at mandated prices by around 30 percent. From January to August, Indonesia ran an oil-and-gas trade deficit of around US$16.7 billion.

The price floor and price ceiling for ride-hailing in Greater Jakarta were lifted by 27.5 percent to Rp 2,550 per kilometer and 12 percent to Rp 2,800 per km, respectively, in the most recent increase, and minimum fares for the entire trip also apply.

"Damn, food delivery is getting pricier these days, but the problem is, people have gotten used to the apps [...] using food delivery services means go broke," Tejo told the Post on Sept. 30.

In light of the rising interest rates, Tejo intends to withdraw his investment from mutual funds and move it to retail government bonds for greater certainty of returns.

"It will be [hard for people with] a lot of liabilities but a small portfolio of assets [...]; it's better to increase investment," Tejo continued.

Financial planner Mike Rini said the issue on consumers' minds in 2022 was the rise in prices of goods and services, unlike 2021, when health concerns prompted many to hold cash for emergencies.

For now, consumers should remain frugal in their spending, she advised, and if they could, seek alternative income from freelancing or a sideline business, using the accumulated emergency funds as capital.

Many were wondering what else to cut back on given that they were already living more simply than before the pandemic, Mike told the Post on Friday, adding that "alternatives are needed".

Consumers should consider investment that produces regular passive income, she continued, such as retail bonds or bank deposits. More educated consumers could delve into the peer-to-peer (P2P) lending market.

Another option to be considered was investing in assets set to increase in value over a long time, such as gold, mutual funds and stocks.

"In an uncertain situation, the price of gold will rise, especially in wartime," Mike continued, and "defensive stocks, like the retail industry, may be expensive but consumption will continue, which makes them resilient."

After the Russian invasion of Ukraine, global commodity prices, including oil and natural gas, have skyrocketed due to economic sanctions that resulted in lower supplies available in the market.

According to figures from the World Bank, the average global price of oil was roughly 39 percent higher in August than it was a year earlier, coming in at $96 per barrel (bbl), while the price of natural gas in Europe had more than tripled to $70 per million British thermal units.

Source: https://www.thejakartapost.com/business/2022/10/09/should-i-still-invest-jakartans-ponder-response-to-inflation.htm