Bank Indonesia Worried That Food Price Inflation Continues, Potentially Lowering People's Purchasing Power

Illustration. (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) explained that food price inflation is volatile or relatively high in the first quarter of 2024, it is feared that it will continue and have an impact on reducing the purchasing power of the middle class.

This is one of the sources of shocks that can disrupt the stability of the Indonesian financial system listed in the book Financial Stability Study (KSK) No. 43 of the September 2024 edition.

"It is feared that relatively high volatile food inflation in the first quarter of 2024 will occur in a persistent manner so that it can reduce the purchasing power of the lower middle class and reduce consumption credit," wrote BI in the Financial Stability Study (KSK) No 43, quoted Wednesday, October 2.

Based on the results of the Financial Stability Study survey No. 43 of the September 2024 edition, it shows that there are at least five sources of shocks that are perceived as disrupting the stability of Indonesia's financial system.

Furthermore, the volatility of export commodity prices is influenced by the dynamics of global demand and supply chain disruption. This can affect the performance of corporate credit, especially in the commodity sector which has a big contribution to the economy and credit. One sector that has the potential to be disrupted is the coal mining sector in line with coal prices in the global market which are still low.

Then, continued geopolitical conflicts can increase the volatility of global financial markets and outflows of foreign funds. These conditions have the potential to cause a weakening of the exchange rate and increase credit and market risk, as well as affect corporate performance, especially with high import content.

Next, the economic growth of key trading partners such as China, which has slowed down, among others, due to structural problems, is feared to affect the performance of exporters' corporations.

Furthermore, the source of shock from cyber risks, namely operational disruption of the banking service financial system, payment system, and supporting operations, as well as cyber attacks.

To note, Indonesia (BI) recently launched the book Financial Stability Study (KSK) No. 43, Edition September 2024 with the theme Maintain Resilience, Continuate Momentum Growth.

BI Deputy Governor Juda Agung said this study book had been published since 2004 and the launch of the KSK book was carried out every semester and this was the 43rd to provide an early warning system to any financial sector that could be prepared in the face of global and domestic uncertainty.

"We launch this Financial Stability Study every semester. The goal is to give an early warning to the financial sector, to players in the financial industry, what risks we face and how we respond to existing risks," he said at the launch of financial stability study book No. 43 and a green calculator, Wednesday, October 2.