Inflation 2024 Is Predicted In The Range Of 2.5-3.5 Percent If Fuel Prices Rise

Illustration. (Photo: Doc. Antara)

JAKARTA - The Indonesian Center of Reform on Economics (CORE) estimates inflation in the range of 2.5-3.5 percent in 2024 if the government increases the price of fuel oil (BBM), especially pertalite.

"Our calculations are that if the government does not increase the price of pertalite, then the inflation rate in 2024 will reach 2.5-3.0 percent. However, if they increase the price they set (the government regulated goods), especially the price of fuel, the price of pertalite is even more specific, and maybe the price of basic electricity tariffs, for example at the regional level there may be a PDAM tariff (Regional Drinking Water Company), then inflation may be able to be between 2.5-3.5 percent," said Research Director of Macroeconomics CORE Indonesia Akbar Susanto in a "CORE Quarterly Review 2024: Economic Challenges in the Middle of Government Transition" virtually in Jakarta, quoted from Antara, Thursday 25 April.

Nevertheless, CORE Indonesia considers the 3.5 percent figure to be still relatively under control because Bank Indonesia (BI) tends to set an inflation target of between 3 percent plus minus 1.

Based on historical data, he continued, the increase in inflation would significantly reduce household consumption in the first three months, especially when there was a drastic increase. After that, the inflation rate will slowly decline until the 20th month.

"For example, if the government increases the price of pertalite, it will be followed by a drastic increase in prices, and the consequence is that consumption in the first three months will decrease. After that, the decline will continue even though slowly until the 20th month. This means that this is a rather long consequence, two months is more than 1 year," he said.

There are a number of factors that have the potential for the government to increase fuel prices. One of them is the escalation between Iran and the Israeli regime which is increasingly tapering, because it will increase international oil prices and influence the government to increase fuel prices. On the other hand, if the escalation of the conflict subsides, then the price of international oil will decrease and the government will not increase the price of fuel.

"At least it's from that factor. Even if it increases later, it means from other factors," said Akbar.

Based on simple calculations, in the 2024 State Revenue and Expenditure Budget (APBN), the government sets a fuel price of 82 United States (US) dollars per barrel. If later the price of international oil soars above 82 US dollars, then there is a reason from the government to increase the price of fuel. However, if the price increase is in the range of this price stipulation, it is possible that the fuel price will not increase.

What are other possibilities for the government to increase fuel prices other than rising international oil prices? One of them is if the government has policies, especially the new government, to save on expenses and use them for the things they promised in the campaign. That might happen," he said.