Entrepreneurs Lament Weak Economy, High Inflation Amid Aggressive BI Rate Growth

24 September 2022 00:34 WIB

TEMPO.CO, Jakarta - Entrepreneurs estimate that the inflation rate in Indonesia will continue to rise despite Bank Indonesia's aggressive interest rate increase by 50 basis points, from 3.75 percent to 4.25 percent on Thursday, September 22, 2022.

The Indonesian Employers' Association (Apindo) Economic Policy Analyst Committee Chair Ajib Hamdani said that the increase was mainly caused by the factors that influenced the increase in global inflation, which as Ajib explained, were affected by disruptions in the supply side instead of high demand or demand-pull inflation.

"If we look in more detail, the rising phenomenon that is happening in Indonesia tends to be due to the cost-push inflation factor," Ajib said on Friday, September 23, 2022.

Ajib explained that there are three main factors that affect the increase of the inflation rate in Indonesia, the first was the government's policy to increase the VAT rate on April 1st from 10 percent to 11 percent followed by the increase in fuel prices on September 3rd, and because of geopolitical conditions that disrupted the global supply chain. 

Ajib asserted that the increased BI interest rate would still cause the inflation rate to rise while also correcting Indonesia's economic growth. Because, Ajib said, an increase in the benchmark interest rate will automatically reduce public consumption.

"The potential for economic growth will be corrected and inflation will continue to steadily increase. Until the end of the year, economic growth tends to fluctuate at around 5 percent," Ajib predicts.

ARRIJAL RACHMAN

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