Observer: Indonesia's Economy Is Already Relatively Good, But Still Must Be Wary Of Rising World Oil Prices, Food, And Interest Rates

Illustration. (Photo: Doc. Antara)

JAKARTA - Institute for Development of Economics and Finance (Indef) economist Dzulfian Syafrian assesses that the national economy is currently in a relatively good condition, but must remain alert to potential economic distortions.

"We must remain vigilant because economic distortions can enter through three channels, namely world oil prices, rising food prices and rising interest rates," Dzulfian said, quoted from Antara, Wednesday, July 27.

According to Dzulfian, these three things must be watched out for because they have an impact on fiscal, monetary, and price stability policies. The increase in world oil prices, he continued, will have an impact on the amount of subsidies that the government must give to fuel oil (BBM).

"The higher the world oil price, especially pertalite and diesel and even Pertamax, the greater the subsidy that must be disbursed. As a result, the greater the burden on the state budget," he said.

He added that rising prices of energy and food commodities globally will also affect commodity prices in the country, so that it will trigger uncontrolled inflation.

Dzulfian said that the impact of rising energy prices, food commodities and inflation would add to the burden on the Indonesian people, especially the lower middle class.

"The increase in food prices will hit people in the lower middle class because their consumption is still dominated by food and beverage goods. Therefore, when the price of food goods rises, it is the small people who are the hardest hit," he said.

Therefore, Dzulfian hopes that the subsidies provided to help the community can be truly targeted, so that purchasing power is maintained and consumption performance does not decline.

"Provide direct subsidies to people in need and make price adjustments so that people adjust their use according to their needs and purchasing power," he said.

In addition, synchronization of fiscal and monetary policies is an option to maintain economic stability, followed by efforts to diversify food and energy, including food and energy sources from abroad.

Previously, the Presidential Chief of Staff Moeldoko stated that the Indonesian economy was relatively good in the midst of the global economic situation which was not doing well due to rising prices of energy and food commodities in foreign markets.

However, the price increase also has the potential to push up inflation, which makes the central bank potentially raise its benchmark interest rate. This condition could lead to a credit slowdown and disrupt the potential for future growth.