TEMPO.CO, Jakarta - The government’s plan to increase the price of fuel is predicted to hinder the country’s economic growth.
Economic observer Purbaya Yudhi Sadewa estimated that the impact (of the fuel price increase) would be felt until November 2015.
“Usually, economic growth will slow down for three quarters after the increase,” he told Tempo.
Based on the previous data, Yudhi said that every 10 percent increase in the price of fuel will trigger an average 0.7 percent inflation and if the government increases the price of fuel by Rp3,000, the inflation will reach 3.5 percent.
“Seeing the current condition, it means inflation rate will be around 8.5 to 9 percent,” he said.
Yudhi said that rising inflation is the consequence from the drop in people’s purchasing power and activities of the business players.
“It is the middle and lower income people who will be hardest hit (by the inflation),” he said, adding that the government should also take this impact into account.
Yudhi further said that the ideal increase would be Rp2,000 per liter because the figure is considered to be moderate enough so as not to trigger a too high inflation rate.
“It is possible that the inflation rate would be around 7 to 7.5 percent. It means our economy will still have rooms to grow,” he added.