Rising Food Prices Are Considered To Lower People's Purchasing Power

Food illustration (Photo: Antara)

JAKARTA - The increase in food prices is considered to reduce people's purchasing power. Recently, the increase in food prices has become a national issue in addition to the increase in demand for food products ahead of the Ramadan period.

"The increase in food prices also encourages a decrease in people's purchasing power, and controlling food prices is the most urgent issue in maintaining inflation levels," said Economist of the Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) Teuku Riefky quoting Antara.

Although short-term solutions in the form of increasing imports to actively reduce supply scarcity and control inflation through the National Food Inflation Control Movement (GNPIP) in various regions have been implemented, long-term strategies are still needed.

On the other hand, El-Nino is expected to begin to subside, and the harvest season will soon take place between the end of April and early May 2024 which has the potential to reduce the scarcity of food supplies.

However, according to Riefky, the increased risk of climate change has the potential to increase the occurrence of natural disruptions such as El-Nino in the future and encourage the need for a more concrete policy to ensure crucial food security in all inflationary management in the future.

In February 2024, volatile price group inflation was recorded at 8.47 percent year on year (yoy), a drastic increase from 7.22 percent (yoy) in the previous month and reached its highest point since October 2022.

Furthermore, core inflation in February 2024 was recorded to be stable at 1.68 percent (yoy), tending to remain unchanged from the previous month. Core inflation reached its lowest annual growth since January 2022, indicating a continuing trend of weakening people's purchasing power.

The monthly growth of core inflation also indicated a similar trend shown by the decline in inflation from 0.20 percent month to month (mtm) in January 2024 to 0.14 percent (mtm) in February 2024.

However, the pressure on people's purchasing power is relatively moderated by the provision of subsidies and social assistance from the government and political parties ahead of the general election (election).

On the other hand, the price group regulated by the government increased monthly to 0.15 percent (mtm) in February 2024 from -0.48 percent (mtm) in the previous month.

The increase was triggered by components of engine kretek cigarettes inflation in line with the gradual price increase transmission by producers against selling prices as a result of the increase in cigarette excise a few months ago.

However, the government's absence of a significant price adjustment in February 2024 caused the annual price inflation regulated by the government to fall to 1.67 percent (yoy) from 1.74 percent (yoy) in January 2024.

Previously, Bank Indonesia (BI) said that the inflation of the Consumer Price Index (IHK) in February 2024 was maintained in the target range of 2.5 plus minus one percent due to the consistency of monetary policy and the close synergy of controlling inflation between parties.

"The maintained inflation is the result of the consistency of monetary policy and the close synergy of inflation control," said Head of the BI Communications Department Erwin Haryono in Jakarta, Friday (1/3).

This synergy is established between BI and the central and regional governments in the Central and Regional Inflation Control Team through strengthening the National Movement for Food Inflation Control in various regions.

Based on data from the Central Statistics Agency (BPS), IHK inflation in February 2024 was recorded at 0.37 percent month to month (mtm), bringing it to 2.75 years on year (yoy) on an annual basis.

Erwin said that in the future, Bank Indonesia believes inflation will remain under control in the 2.5 plus minus one percent target range in 2024.