During the first half of 2018, Indonesia’s inflation was in a low number compared to inflation in 2017. Except in March, where in March 2017 there was a deflation of 0.02%, while in March 2018 inflation was recorded at 0.20%. The low inflation in the first half of 2018 was inseparable from the government’s hard work in maintaining the stability of food prices, especially rice. In addition, there was a major harvest in April that increased the supply of rice. Although some commodities such as broilers and shallots recorded price increases, the share of rice was large enough so that foodstuffs remained deflationary. In addition, low inflation was also supported by the government’s measures to control fuel prices.
However, the low inflation rate does not necessarily mean good. If examined more deeply, the rupiah exchange rate against the USD tends to decline to IDR 14 thousand compared to 2017 which is still in the range of IDR 13 thousand. From that fact, the price of the market should increase. Especially if the demand is still the same or even increasing, given the moment of Ramadhan and Eid al-Fitr, where the possibility of an increased level of consumption, took place in May-June. In fact, the price of food in these two months was still under control.
Then we can then see the value of core inflation, which based on data from the Central Statistics Agency (BPS) from January to April the number continues to decline from 0.31 in January, 0.26 in February, 0.19 in March and 0.15 in April. The increases just occurred in May at 0.24 and June at 0.24. However, this increase has not been significant and if seen in general from the beginning of the year, the core inflation rate is still relatively low. The low inflation value can indicate that the public demand is still low so the price of goods does not experience a significant increase. The low public demand indicates a low desire for people to shop and can describe the lack of enthusiasm for the economy.
On the other hand, the moment of Ramadan and Eid al-Fitr also coincided with the new school year for students. So that parents tend to reduce the portion of income used for consumption to be allocated to education costs. Meanwhile, from the upper middle class, there is also a change in consumption patterns that diverts money to savings and investment.
So, it can be concluded that Indonesia’s low inflation in the first half of 2018 can be said to be good because the price aspect is maintained and the purchasing power does not decrease, only the demand is still low because people divert their income to other things that are also good for the economic climate, namely investment. But the government also needs to be vigilant if the action to hold this consumption continues. Because it is feared that it can make economic growth targeted by the government not be achieved.