Global Inflation Rising Trend Continues, Coordinating Minister Airlangga: Indonesia Still Under Control

Coordinating Minister for the Economy Airlangga Hartarto. (Dok ekon.go.id)

JAKARTA - Indonesia's inflation is still under control amid the rising trend of inflation in various countries.

Inflation realization in May 2022 was recorded at 3.55 percent year on year (yoy), a slight increase compared to the previous month which was recorded at 3.47 percent (yoy).

Coordinating Minister for Economic Affairs Airlangga Hartarto said that although inflation in May increased slightly on an annual basis, it remained within the inflation target range that had been set at 3 plus minus 1 percent (yoy).

"Indonesia's inflation is still under control amid the upward trend in inflation that is still occurring in various countries. Like the European Union, inflation is currently recorded at 8.1 percent (yoy) in May 2022," he said in an official statement, Thursday, June 2.

Furthermore, Airlangga said, the increasing trend of inflation also occurred in India, South Korea and the UK, where the realization of inflation was recorded at 7.79 percent (yoy), 4.8 percent (yoy) and 9 percent (yoy) in April 2022.

In fact, Russia's inflation was recorded at 17.83 percent (yoy).

On a monthly basis, inflation was recorded at 0.40 percent (mtm) in May, down from 0.95 percent (mtm) in April.

The inflation achievement in May was influenced by the movement of all components.

Volatile Food (VF) component inflation was recorded at 0.94 percent (mtm) or 6.05 percent (yoy), mainly contributed by the increase in prices of chicken eggs and shallots.

"The current increase in the price of broiler eggs is due to the high production costs that come from feed prices and the high demand from the public. The increase in the price of chicken eggs has also pushed up the NTP of the Livestock Subsector by 0.07 percent," he said.

One of the commodities that experienced a decline in price was cooking oil with a minus share of 0.01 percent.

The government's policy regarding the ban on the export of CPO and a number of its derivative products on April 28 to May 23, 2022 led to a decline in palm oil prices and resulted in a decrease in overall cooking oil prices.

Core inflation was recorded at 0.23 percent (mtm) or 2.58 percent (yoy). Annually, core inflation decreased slightly compared to April which was recorded at 2.60 percent (yoy), but remained consistently high.

This shows that public demand remains strong after the HBKN Ramadan and Eid al-Fitr moments.

Meanwhile, based on contributing commodities, core inflation in May was influenced by rising prices for fresh fish, rice with side dishes, and sweet bread.

The administered price (AP) inflation component was recorded at 0.48 percent (mtm) or 4.83 percent (yoy) with a share of 0.09 percent, contributed mainly by the increase in air transport fares driven by high backflow mobility and the recovery in mobility after HBKN Eid 2022.

In general, the impact of rising global commodity prices on CPI inflation is currently limited.

However, if you look closely, the transmission of the increase in global food prices in May 2022 has already been seen in the inflation of the Wholesale Price Index (IHPB).

The May IHPB was recorded at 0.33 percent (mtm) or 4.23 percent with the largest contributor being the industrial sector (0.31 percent).

The industrial sector contributed, among other things, to the increase in wheat flour and instant dry noodles, in line with the increase in global wheat prices.

"The government will continue to monitor and observe the propagation of external pressures, especially the increase in global commodity prices which are transmitted in the form of price increases and domestic inflation," he said.

In addition, said Airlangga, the government and Bank Indonesia will continue to strengthen the synergy of policy communication to support the management of public inflation expectations and keep inflation in the target range.