Sri Mulyani's Staff Respond To Swelling Inflation: Commodity Prices And Demand For Eid Inevitability

Finance Minister Sri Mulyani (left) while shopping at a traditional market (Photo: Instagram @smindrawati)

JAKARTA - The Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance, Febrio Kacaribu, assessed that the increase in the inflation rate in May 2022 to 3.55 percent year on year (yoy) reflects various macroeconomic conditions currently occurring.

"This inflation is the highest recorded since December 2017 which is influenced by pressures on global commodity prices and the impact of the increase in demand for Eid," he said in a press statement today, Friday, June 3.

According to Febrio, food commodities make the biggest contribution. On a month-to-month (mtm) basis, May inflation declined to 0.40 percent (April 2022 at 0.95 percent).

In terms of inflation, it was observed that it fell slightly by 2.58 percent yoy compared to April's 2.60 percent. He said there was an increase in inflation in service commodities, such as recreation and restaurant services. In addition, core food commodities also experienced an increase, such as fresh fish and sweet bread. On the other hand, there is a slowdown in inflation for clothing and personal care as demand normalizes after Lebaran.

"The development of core inflation was driven by people's purchasing power which is increasingly recovering amidst the impact of rising global commodity prices," he said.

Febrio added that food price inflation was volatile with another increase to 6.05 percent yoy. Some commodities that increased, including eggs and chicken meat, which rose due to an increase in the price of feed and shallots due to the lack of supply from production centers.

On the other hand, he said that the policy of banning CPO exports supported by better distribution control was able to push down the price of cooking oil.

"In the future, it is necessary to watch out for the wet dry season, which causes a decrease in the productivity of various chili peppers and the increase in fertilizer prices, which can push up general food prices in line with restrictions on food and fertilizer exports in 10 countries," he said.

Then for price inflation regulated by the government (administered price), in May 2022 it moved stable at 4.83 percent yoy.

The highest inflation was contributed by air freight fares in line with the momentum of the backflow of Lebaran and holidays. Apart from the increase in demand, the increase in tariffs is also influenced by adjustments due to the increase in production costs. Meanwhile, energy inflation only rose slightly.

"To maintain the process of economic recovery and people's purchasing power, especially access to food and energy needs, the government together with the Indonesian House of Representatives have approved an additional allocation of subsidies and compensation in the 2022 APBN. This shows the role of the APBN as a shock absorber to minimize the impact of rising energy commodity prices. and global food," he said

"Through this additional allocation, it is hoped that the domestic inflation rate will continue to be maintained to ensure that the trend of economic recovery which is still in its early stages continues," concluded the Head of BKF Febrio Kacaribu.