Core Inflation Drops as COVID-19 Affects People's Purchasing Power

TEMPO.CO, Jakarta - Bank Danamon head economist Wisnu Wardhana on Monday predicted the core inflation drop could potentially continue in the coming months due to the slow distribution of the much anticipated coronavirus (COVID-19) vaccine, which would affect consumers’ trust and continue to pressure people’s purchasing power.

“The core inflation might continue to drop due to the vaccine’s slow distribution, which may affect consumers’ trust and increase uncertainty,” said Wisnu Wardhana on November 2. 

Statistics Indonesia (BPS) reported that October’s month-to-month core inflation could only reach 0.04 percent, which was lower than September’s inflation that recorded 0.13 percent. 

The year-on-year core inflation in comparison was 1.74 percent in October 2020, a significant drop compared to October of 2019 that reached 3.20 percent. In Monday's press conference, BPS head Suhariyanto said the drop in core inflation reflected people’s purchasing power that had yet to recover. 

“Forty percent of lower economy groups were affected by the coronavirus as many were laid off and had their wages cut. Meanwhile, the middle class are holding back their expenses,” said the BPS head. 

However, Wisnu argued that October’s inflation development was yet to be a factor that would change Bank Indonesia’s accommodative approach amid the COVID-19 pandemic. 

Read: Jakarta Inflation Rate at 0.02 Percent in September 2020, BPS Says

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