Indonesian inflation is expected to have eased further in February 2015 on lower food prices. One notable exception, however, is rice. Rice prices have soared approximately 30 percent year-on-year (y/y) up to IDR 12,000 per kilogram in February. Higher rice prices have been caused by distribution obstacles for Raskin (‘rice for the poor’) operations in combination with this year’s late harvest season (between March and June). Fluctuation in prices of rice, the staple food of 250 million Indonesians, has a significant impact on inflation in Indonesia.
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The price of rice in several Indonesian regions has risen by between 17 to 23 percent to IDR 8,500-9,000 per kilogram as rice production at the start of the year has not been able to meet rice demand. In January 2015, Indonesian rice production stood at 2 million tons, whereas demand reached 2.5 million tons. Inflation of rice is a sensitive issue in Indonesia because it jeopardizes declining poverty rates as poorer segments of Indonesian society spend over half of their total disposable income on food items, primarily rice.
Armida Alisjahbana, Head of the National Development Planning Ministry (Bappenas) expects that Indonesia’s poverty rate will ease to 9-10 percent in 2015, from 11.3 percent currently. The minister is optimistic that the target for next year can be achieved because the government is currently optimizing several poverty alleviation programs. These programs are arranged in four clusters (expounded below). According to Alisjahbana, the key to success of these programs is good coordination between the central and regional governments.
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Indonesia's Ministry of National Development Planning (Bappenas) wants to see declining unemployment and poverty rates in 2016 as economic growth improves in Southeast Asia's largest economy. Bappenas official Bambang Prijambodo said accelerated infrastructure development in the second half of 2015 and 2016 should manage to create more employment opportunities. Furthermore, the recent series of economic stimulus packages released by the Indonesian government aims to improve the country's investment climate and therefore should trigger more private investment.
Indonesia's poverty rate is expected to jump to between 11.13 and 11.37 percent of the total Indonesian population in 2013 due to inflationary pressures. Inflation may reach 9.2 percent at the year end. The new poverty forecast is significantly higher than the government's original target of 9.5 to 10.5 percent as set in the country's State Budget. The revised forecast was presented by Indonesia's Ministry of National Development Planning (Bappenas). Poverty basket inflation is expected to rise accordingly.
It is official. As of Saturday 22 June 2013, after months of uncertainty and speculation, the price of Indonesia's subsidized fuel has finally been raised. Starting from 0.00 am (midnight) on Saturday, all Indonesians have to pay a higher price of gasoline and diesel. Gasoline has been raised by 44 percent to IDR 6,500 (USD $0.66) and diesel by 22 percent to IDR 5,500 (USD $0.56) per liter. The minister of Energy and Mineral Resources, Jero Wacik, made the announcement on late Friday evening, after which the hike took effect immediately.
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