Increased BBM Prices Drives The Poverty Rate To Level 10.3 Percent, Indef: Social Assistance Must Be Plused

Illustration. (Photo: Doc. Antara)

JAKARTA - Center of Industry, Trade, and Investment Institute for Development of Economics and Finance (Indef) researcher Ahmad Heri Firdaus estimates that the poverty rate will be 10.3 percent in September 2022 due to the increase in fuel oil (BBM) prices.

"After being analyzed, the potential for poverty can exceed the poverty rate during the COVID-19 pandemic, maybe reaching 10.3 percent in September 2022 so that social assistance must be added," Ahmad Heri said in an online discussion quoted by Antara, Wednesday, September 21.

He estimates that the increase in fuel prices will make inflation on an annual basis in September 2022 reach 1.86 percent and annual inflation throughout 2022 will reach 7.7 percent.

"Economic growth will also decrease by minus 0.02 percent with an increase in fuel prices, with household consumption reduced by 0.65 percent and investment of 1.7 percent," he said.

He predicts that people's real income in rural areas can decrease by 1.28 percent to 1.63 percent due to the increase in fuel prices, while real income for people in urban areas can decrease by 1.15 percent to 2.58 percent.

"This downstream program also has a bigger challenge because of the increase in energy costs, because energy costs are one of the core structures of the production cost structure," said Ahmad Heri.

For this reason, the government needs to create an assistance program for business actors in the real sector who are experiencing an increase in production costs. The government is also considered to need to increase the social assistance budget (bansos) for the community to reduce poverty.

"So the impact is quite wide and varied, not only the lower middle class who are directly affected and they are given social assistance, but in terms of production, this will certainly experience pressure," he said.