Don’t Forget to Mitigate Prices During Ramadan

ENNY SRI HARTATI

· 4 minutes read

Indonesia’s first simultaneous presidential and legislative elections were held peacefully on April 17. Nonetheless, the hustle and bustle of the democratic festivities are not over. Both sides still have to wait for the outcome of the elections from the General Elections Commission (KPU) in May 2019.

The election process, which began on Sept. 20, 2018, was quite tiring, especially for the business world. The political event also caused the performances of both the government and the legislators to not be optimal.

In the past six months, the media rarely reported on important policies in the economic fields. Media coverage, news, and discussion were dominated by political issues in the presidential and legislative elections. In fact, in mid-May 2019 or less than two weeks from now, the Muslim community will enter the fasting month of Ramadan. Usually, ahead of Ramadan, the headlines of the newspapers are dominated by reports on the increase in prices of basic commodities in a number of regions.

Are the prices of basic commodities under control or is the media simply not monitoring the prices of such important commodities as they focus on the results of the presidential and legislative elections?

Based on data from Statistics Indonesia (BPS) at the beginning of April 2019, inflation from January-March 2019 reached 0.35 percent, 2.48 percent year on year. In fact, foodstuff recorded 0.01 percent deflation in March 2019. However, the BPS also reminded that on an annual basis, foodstuff inflation in March 2019 was recorded at 0.56 percent and food was 3.58 percent.

Even though inflation is still relatively under control, the anticipation and mitigation of potential price increases cannot be ignored, because in the middle of this month, the prices of garlic rose sharply to Rp 44,350 (about US$3) per kilogram, up 26.89 percent compared to the beginning of April 2019. Historically, the increase in price of one type of food commodity was quite vulnerable and could quickly affect other commodities.

In addition, many people still complain about the high price of airline tickets on all domestic flights. In fact, during the annual Idul Fitri homecoming exodus, the demand for public transportation services rises sharply. It means that even if the government does not raise fuel prices, the high price of airplane tickets may also lead to an increase in fares for other transportation modes.

In the midst of sluggish economic growth, holidays must be optimally used to boost household spending. Moreover, Indonesia has a "luxury" tradition of the Idul Fitri homecoming throughout the archipelago.

To not lose momentum, the increase in the demand must be supported by availability and adequate supplies. It will, of course, be very unfortunate if the momentum is not able to push up household spending. The increase in demand during Ramadan is also expected to contribute to an increase in investment and productivity in the country.

As an illustration, there was the loss of momentum during Idul Fitri in 2018, where the increase in demand ahead of the annual festivity was only able to boost the sales of consumer goods, most of which consisted of imported goods.

The economy managed to grow by 5.27 percent year on year in the second quarter of 2018. Unfortunately, during that time, retail inventories were high as many stocks were still stored at warehouses because the increase in production in a number in business sectors ahead of Idul Fitri was not followed by an increase in sales until the end of Idul Fitri.

In fact, under normal conditions, the sales turnover during Ramadan and Idul Fitri contribute around 30 percent of total sales during the year. As the result, economic growth slowed in the third and fourth quarter of 2018 due to stagnant investment growth, especially in the manufacturing industry.

Therefore, the most important thing is that the increase in the people\'s spending must be optimized to spur national productivity. The key is to maintain the stability of the prices of basic needs, especially staple foods.

Furthermore, in anticipating Ramadan and Idul Fitri this year, the distribution of goods must be prepared carefully. The simplest thing is that the operation of public transportation facilities should be well prepared. The work of the regional inflation monitoring team can be optimized to assess the right levels of supply and demand of basic commodities in each region.

With optimal anticipation and mitigation, economic conditions will be better. Whoever wins the presidential election, the Joko Widodo-Jusuf Kalla government still holds the mandate to lead the country until October 2019.

The public hopes Idul Fitri will be filled with joy with growing domestic economic activities, with no pressure caused by soaring prices.

ENNY SRI HARTATI, Executive Director of the Institute for Development on Economics and Finance

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