Governor of Bank Indonesia (BI) Perry Warjiyo said that currently the world economy is in turmoil, and has even resulted in stagflation or recession in a number of countries. Stagflation itself is characterized by slow, static economic growth and rising prices (inflation). Soaring energy and food prices around the world, including Indonesia, reflect this situation
“Russia-Ukraine is a supplier of 20 percent of global energy and food, that’s why global food prices are going up high, energy prices are going up high. This is what we are facing, the world is in turmoil, we do not attack directly, but we are affected,” said Perry at the Kick Off event of the National Movement for Food Inflation Control (GNPIP) in Jakarta, Wednesday (10/8).
Perry explained, this situation will cause inflation in the country in July 2022 year on year (yoy) reached 4.94 percent. From this figure, food inflation contributed quite high, namely 10.47 percent, whereas, according to Perry, food inflation should have been maintained at the level of five to six percent.
“Remember that food inflation is a stomach problem, a people’s problem and it (the impact) is directly on welfare, this is not just an economic problem, a social problem and also how in October and so on, there should be no political problems,” he said.
Inflation that penetrated the level of 10.47 percent, said Perry, threatens the lives of the lower class. According to him, they will find it difficult to meet their basic daily needs.
“Food inflation is 20 percent of the composition of public expenditure, in total. For the people below, it could be 40 or 50 percent. The high, or the rich, may have a small (impact) but for the lower class, food inflation can (impact) 40-50 or even 60 percent of the weight of their expenditure. So lowering 10.47 percent to six or even five percent really has a very big social impact for the welfare of the people,” explained Perry.
So far, the government together with local governments, BI and various other institutions have promoted GNPIP to continue to suppress food inflation. Market operations, said Perry, will soon be carried out in various regions so that in the future the prices of basic needs can be stabilized.
Furthermore, Perry explained that all parties must work well together to reduce food inflation. The reason is, although the country’s economy in the second quarter grew 5.44 percent, the Indonesian economy has not fully recovered from the shocks of the COVID-19 pandemic.
“What is the impact of the global on the Indonesian economy, especially inflation and prices that directly affect the people. Synergy between governments. BI and various institutions and local governments are very good so that our economy can grow very high at 5.44 percent. But this has not been recovered, because the people only started to eat well after last Ramadan. Previously, I couldn’t eat well because of COVID-19, I just traveled, I just ate (good) since last Ramadan, but haven’t fully recovered,” said Perry.
Long Term Solution
Indef economist Eka Puspitawati said the rising food inflation in Indonesia was triggered by a fairly high dependence on food imports and food production in the country which was still unable to meet domestic needs. Therefore, according to him, so that food inflation does not get higher, the government should first secure the main food supply, such as rice.
He said the government’s steps to conduct market operations in various regions could be done. However, it is only a short term solution which means the same problem has the potential to repeat itself. Eka advised the government to start looking at other countries that might still be able to export food to Indonesia.
“Like it or not, we need an alternative to imports to be able to reduce it in the short term. Must be smart to find alternative sources. For example, we can usually come from America, or Russia, Ukraine, but now like it or not we have to look for other sources, must be able to map, must be able to open up other alternative food sources. Maybe we can look around ASEAN first, so that we can explore and seek from ASEAN countries, maybe we can fulfill it from there,” said Eka to VOA.
Furthermore, Eka said, with the potential that Indonesia has, food inflation should not have soared to 10.47 percent. He considered, so far the government’s policies are not enough to encourage increased production in the agricultural sector.
“We can see for example Thailand. In terms of GDP, Thailand is smaller but they focus on strengthening agriculture, so they are relatively more stable in terms of agriculture, even exports in agriculture are much larger than Indonesia. It seems that the government’s orientation is still not visible, what to do with the agricultural sector. There is still a mix of agriculture and others, or agriculture that is prioritized is agriculture with an industrial base, for example for palm oil. Yes, it can, but don’t forget about main food, this is what I see there are still no pros to it from the government,” he explained.
Eka hopes that, in the future, the government can focus on encouraging more massive development in the agricultural sector, so that food self-sufficiency can be realized more quickly, and dependence on food imports can be significantly reduced. [gi/ab]