Indonesia still safe from three straight months of deflation: officials

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JAKARTA (ANTARA) – The deflation that Indonesia has experienced for the past three consecutive months is still classified as safe deflation and is in line with the government’s goals, according to an official from the Coordinating Ministry for Economic Affairs.

Ferry Irawan, Deputy Minister of Macroeconomics and Fiscal Coordination, noted here on Sunday that deflation was mainly caused by food items with high volatility, with the month-on-month deflation rate of food commodities in July 2024 at negative 1.92%.

Statistics Indonesia (BPS) recorded a deflation rate of minus 0.18% (MTM) in July 2024. Meanwhile, deflation rates in May and June were minus 0.03% and minus 0.08% (MTM), respectively.

Furthermore, the inflation rate in July 2024 was 2.13% (year-on-year).

Irawan stressed that Indonesia’s headline inflation rate will remain within the target range by the second quarter of 2024, but efforts are still needed to control inflation.

It is considered necessary to control inflation because if inflation is too high, it affects consumers, while if inflation is too low, it affects producers.

For 2024, the government’s goal is to maintain Indonesia’s inflation rate at “2.5%±1%”.

“The inflation rate remains in line with the inflation target of 2.5 per cent. However, due to the volatility of food components, we tolerate an increase of plus or minus 1 per cent,” he commented.

Earlier, Jakarta’s Institute for Development of Economics and Finance (Indef) senior economist Didik J Rachbini stressed, Friday (August 2), the need to pay attention to deflation in July 2024.

He assessed that deflation indicates that people’s financial capacity is insufficient to buy what they need, which is a macroeconomic phenomenon.

Rahebini warned that without appropriate policies targeting the macroeconomy and the real economy, deflation in July 2024 could have a negative impact on the economy as it would lead to a decline in consumer spending.

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