Indonesia’s Inflation Is Still Safe


The world is in the shadow of crisis and recession. Several countries experienced significant increases in inflation. Some countries are even facing bankruptcy. Fortunately, according to Bank Indonesia, Indonesia’s inflation is still under control.

Earlier this month, the Central Statistics Agency (BPS) recorded Indonesia’s inflation in May 2022 at 3.55% (YoY), which is the highest record since December 2017.

BPS also noted that core inflation in May touched 2.58% (YoY), lower than April’s 2.60% (YoY).

Although rising, inflation is still within the target range of Bank Indonesia (BI) of 2% – 4%. BI Governor, Perry Warjiyo, predicts that inflation will be in the range of 4.2% by the end of this year.

That is, even though it is slightly higher than the target, it can still be said to be under control.

controlled inflation in Indonesia even occurred when BI injected large liquidity into the economy through a burden-sharing policy with the government.

As is known, in dealing with the coronavirus disease (Covid-19) pandemic, BI is assisting the government in funding the APBN through the burden-sharing scheme. BI is a standby buyer for Government Securities (SBN) in the primary market.

This burden-sharing scheme has been carried out since the beginning of the Covid-19 pandemic and will end this year.

In 2020, BI has purchased SBN under the burden-sharing scheme of IDR 473.42 trillion. Throughout 2021, BI has purchased SBN for the 2021 State Budget funding of IDR 358.32 trillion.

This means that during 2020 and 2021 BI will inject liquidity of around Rp. 830 trillion into the economy. And this year, BI targets the purchase of SBN worth Rp 224 trillion.

It is feared that the Burden sharing carried out by BI since 2020 will trigger a spike in inflation. However, it did not happen or still has not happened until now.

The use of the burden-sharing scheme is based on financing groups for public goods/benefits and non-public goods/benefits.

Public goods financing that concerns the lives of many people consists of financing in the fields of health, and social protection, as well as sectoral ministries/agencies (k/l) and local governments.

with the large burden-sharing being injected into the community, domestic inflation is still low. Throughout 2020 inflation was only 1.68%, far below BI’s target of 3% plus-minus 1%. Meanwhile, in 2021 inflation was recorded at 1.87%, again below BI’s target.

During the Covid-19 pandemic, the wheels of the economy faltered. The government has repeatedly tightened or relaxed social restrictions. Filled with uncertainty, people can hold back on consumption.

Meanwhile, this year, social restrictions have been relaxed and the economy is running so that people are certainly more daring to increase household spending