JAKARTA (Reuters) – Indonesian President Joko Widodo on Friday warned the fallout from the war in Ukraine could disturb domestic price stability, and questioned how long the government could keep local fuel prices steady amid high global oil prices.
The inflation rate in Southeast Asia’s largest economy has so far stayed benign, with February’s headline inflation rate of 2.06% at the lower end of the central bank’s 2% to 4% target range.
However, Jokowi, as the president is known, said the government has put a lid on fuel prices to keep inflation low.
“Oil prices … have risen twofold (since 2020). All countries have raised retail prices, but we here are still holding them. I’ve asked my (finance) minister, how long can we hold this amid the energy shortage?” Jokowi said at a university event in Central Java.
The government has compensated state firm PT Pertamina, Indonesia’s biggest fuel distributor, to keep retail prices unchanged for its low quality fuels.
Pertamina has also offered higher octane fuels below competitors’ prices.
Jokowi also noted a spike in global food prices due to the conflict, including of wheat, and a persistent shipping container shortage worldwide will make it harder to contain local price pressures.
“We must manage the economy carefully at the moment,” Jokowi said.
Bank Indonesia and the government would mitigate upside risks to inflation by aiming to control volatile food inflation within a 3% to 5% range, the central bank said earlier this week, adding that authorities would ensure supply and distribution of foodstuff ahead of religious festivities.
Indonesian food prices typically rise ahead of the Muslim fasting month of Ramadan, which will start in early April.
Palm oil export have been tightened to try to control domestic cooking oil prices that surged 40% earlier this year.
Local media has also reported rising prices of soy-based tempeh and tofu, as well as sugar, beef, and other foodstuff.
(Reporting by Stefanno Sulaiman and Gayatri Suroyo; Editing by Martin Petty)
