Don't Let It Happen! The Government Calls There Must Be Victims If There Is A Stagflation

Illustration (Photo: Doc. Ministry of Finance)

JAKARTA The government through the Deputy Minister of Finance (Wamenkeu) Suahasil Nazara stated that the current national economy is in a fairly well-maintained condition. According to him, one of the phenomena that is now the scourge of many countries is the occurrence of stagflation.

It was explained that the stagflation occurred due to declining economic growth or even being at the level of minus with a high inflation rate in the country. The representative from Sri Mulyani said that Indonesia was lucky enough because it could maintain the growth rate even though inflation was in the upper range.

Indonesia stagflation or not? No, because our economic growth in the second quarter of 2022 ago was quite impressive 5.4 percent. But inflation is indeed rising," he said through a virtual channel on Monday, September 12.

Suahasil added that the current conditions are quite different from the early days of the 2020 pandemic. He said, at that time economic growth touched a negative level due to quite strict mobility restrictions. Not only in Indonesia, restrictions on social activities also occur in many countries in the hope of reducing the spread of COVID-19.

But at that time inflation was not high because everyone was at home, so the demand for low goods. Coal, petroleum, and others until the price fell because no one bought it," he said.

The situation began to change at the end of 2021 when the movement of people gradually returned to normal which resulted in a significant increase in demand at the same time. This was then exacerbated by the geopolitical situation in Eastern Europe which resulted in disruption to the supply chain side.

Furthermore, many countries are increasingly depressed due to economic growth that has not yet recovered plus supply side disruptions so that inflation soars uncontrollably.

Well, if inflation is combined with declining economic (growth), this is the perfect storm. It's very difficult to handle it. Because, if what happens is stagflation, then some government policies will be taken and some will become victims, said Suahasil.

In the editorial notes, high inflation is usually responded by the central bank by raising interest rates in order to maintain the stability of the currency exchange rate. If the interest rate increases, then the cost of funds will be higher.

This can be a burden for business actors in carrying out productive activities, especially expanding their business. As a result, the wheels of the economy have become disturbed which can result in obstacles to the overall recovery process.

If this happens, the gross domestic product level will be depressed and the national economic level will find it difficult to grow optimally.