Mrs. Sri Mulyani Emergency, Inflation Could Fly Up To 5.5 Percent If Pertalite, Electricity And Gas 3 Kg Increase

JAKARTA - It is believed that the government's steps to adjust a number of prices and tax rates will significantly raise inflation levels this year.

This was conveyed by the Executive Director of the Center of Reform on Economics (CORE) Mohammad Faisal in a virtual discussion today. According to him, without an increase in the price of goods or taxes, the inflation rate will certainly increase.

"If yesterday without an increase in VAT (value added tax) of 11 percent and an increase in Pertamax in April, then our 2022 inflation projection is estimated at 2.5 percent. This means, without the policy of increasing the inflation rate this year, it will be much higher than the 2021 inflation of 1.8 percent," he said on Tuesday, April 19.

Faisal added that with the current condition when VAT is 11 percent and the Pertamax price has just been applied, the estimated inflation rate will be 3.5 percent.

Then, the CORE economist also conveyed a simulation of the movement of inflation when the discourse to increase the price of metallurgy was actually realized.

"When pertalite increases with the assumption that it will be IDR 9,000 per liter, then we see the inflation rate will be 5 percent," he said.

Faisal also said that if all the planned increase in prices and tariffs actually happened, as has been reported recently, the inflation level could almost double from the current government's assumption.

"With the increase that has occurred and there will also be an increase in pertalite, electricity rates, and 3 kg LPG, we see the inflation rate can be 5.5 percent. This means that there is a spike in inflation that is much, much higher than in the pre-pandemic period," he explained.

For information, the 2022 State Budget Law states that this year's inflation target is set at 3 percent plus minus 1 percent.

Meanwhile, according to a report from the Central Statistics Agency (BPS) it is known that the inflation rate in March 2022 was 2.64 percent on an annual basis (year on year / yoy). The book was the highest since April 2020 with 2.67 percent yoy.

Meanwhile, the increase in VAT to 11 percent has been executed by the Minister of Finance (Menkeu) Sri Mulyani on April 1, 2022 ago. This step is also the implementation of the mandate of Article 7 of Law Number 7 of 2021 concerning the Harmonization of Tax Regulations (UU HPP).