Rising food prices are the main cause of inflation in July, predicts an expert

TEMPO.CO, Jakarta – The director of the Center for Economic and Legal Studies (Celios), Bhima Yudhistira, predicted that inflation in July 2022 would reach 4.6% year-on-year.

Statistic Indonesia (BPS) previously announced inflation in June 2022 at 4.35%. The number was recorded as the highest in the past five years since June 2017.

According to Bhima, food prices, such as shallots, chillies, beef, eggs and chickens, will still be the biggest contributor to inflation this month. Meanwhile, convenience food producers began to adjust the selling price due to the rising cost of imported raw materials.

“Weather conditions, rising fertilizer prices, up to rising chicken feed prices, affect selling prices at the consumer level,” he told Tempo on Saturday, July 9.

The increase in the electricity tariff would also affect the increase in inflation although it is not significant.

Bhima said inflation in Indonesia will increase the cost of living as job opportunities stagnate. “This condition is called stagflation.”

Until today, he continues, 11 million workers are affected by the Covid-19 pandemic. Some of them are unemployed due to the redundancy policy and are still waiting for vacancies. But many companies are starting to make efficiencies, including postponing the hiring of new employees, which is caused by rising raw material costs.

At the same time, the rise in interest rates led to a drop in household consumption. As a result, there is an increase in the cost of funds for business actors, which has the potential to disrupt economic recovery.

Foreign capital outflows, especially in the debt securities market, are also shrinking . “As a result, the weakening of the rupee exchange rate is inevitable,” he said.


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