31-8-2023 (JAKARTA) The governor of Indonesia’s central bank has announced that the country’s inflation rate is among the lowest in the world, with the Consumer Price Index (CPI) inflation falling rapidly and returning to its target of 3 percent, with a margin of 1 percent.
Governor Perry Warjiyo of Bank Indonesia stated, “Indonesia’s inflation has dropped from 5.51 percent at the end of 2022 to 3.08 percent in July 2023, on a year-on-year basis, making it one of the lowest in the world.”
Speaking at the 2023 National Coordination Meeting (Rakornas) for Inflation Control in Jakarta, Warjiyo highlighted that the decline in inflation was seen across all categories, including core inflation, volatile food prices, and government-regulated prices.
He also mentioned that all regions in Indonesia experienced a decrease in inflation and were within the national target.
Warjiyo attributed this achievement to the close collaboration between the central and regional governments in controlling inflation, as well as the consistent policies of Bank Indonesia in coordinating with regional inflation control teams, including the National Food Inflation Control Movement (GNPIP) in various regions.
Bank Indonesia estimates that inflation will remain under control within the target range of 3 percent, with a margin of 1 percent, for the year 2023. In fact, it is even expected to reach around 3 percent by the end of the year.
However, Warjiyo emphasized the need to further reduce inflation to the target of 2.5 percent, with a margin of 1 percent, by 2024.
He affirmed, “We believe that low inflation is a crucial factor for Indonesia’s economic growth and the welfare of its people.”
Warjiyo highlighted that Bank Indonesia continues to strengthen its policy mix to maintain stability and support economic growth by collaborating with the government. Monetary policy is consistently focused on maintaining stability, controlling inflation, and stabilizing the exchange rate of the Indonesian rupiah.
In order to promote growth, the central bank is implementing loose and pro-growth macroprudential policies, including providing substantial liquidity incentives amounting to Rp158 trillion (approximately US$10.4 billion) to banks for credit and financing in priority sectors, such as downstream agriculture and micro, small, and medium enterprises (MSMEs) in the food sector.
Warjiyo also mentioned the efforts to accelerate the digitalization of the payment system, expand the use of QRIS (Quick Response Code Indonesian Standard) for payments, distribute social assistance digitally, and promote electronic financial transactions at the regional level.
Bank Indonesia has mobilized all 46 of its representative offices across Indonesia to coordinate with local governments in controlling inflation through initiatives such as low-cost markets, ensuring food commodity security, promoting interregional cooperation, facilitating smooth distribution, and enhancing coordination, communication, and data digitization.
Warjiyo revealed, “The strengthening of the National Food Inflation Control Movement is tailored to the characteristics of each region in Indonesia to achieve precise targeting.”
The central bank also projects that inflation in 2024 will fall further within the target range of 2.5 percent, with a margin of 1 percent.
Warjiyo emphasized the need for strong policy synergies between the central and regional governments and Bank Indonesia to achieve the inflation reduction target. This includes addressing short-term challenges such as the impact of El Nino, ensuring supply availability and affordability, as well as tackling structural issues related to inflation control, such as productivity enhancement, distribution efficiency, data integration, and institutional and human resource strengthening.
