Fuel subsidy still needed as recession looms: Indef

TEMPO.CO, JakartaInstitution for Economic and Financial Development (Indef) researcher Nailul Huda said the fuel subsidy policy is still needed as it could save Indonesia from recession.

“Fuel subsidy policy is still necessary to contain inflation. If fuel prices are not contained by subsidies, inflation in Indonesia will skyrocket,” Nailul said. Tempo Thursday, July 14, 2022.

Nailul explained that the threat of recession facing the country is generated by global and domestic inflations which have increased significantly. Compared to Thailand, Myanmar and Singapore, Indonesia’s inflation rate is relatively low.

The inflation rates in Thailand and Malaysia are 7.66% and 2.8% respectively, while the inflation rate in Indonesia is only 4.35%. “Malaysia and Indonesia both have fuel subsidies for community needs. So inflation rates in Indonesia and Malaysia are relatively low,” Nailul said.

Finance Minister Sri Mulyani Indrawati has previously highlighted the potential for recession as Indonesia is ranked 14th out of 15 Asian countries likely to experience an economic recession, according to the latest Bloomberg survey.

“We will remain vigilant,” Sri said during a press conference for the G20 side event in Nusa Dua, Bali, Wednesday, July 13, 2022.

Sri stressed that all policy instruments would be used including fiscal, monetary, financial sector policies and other regulations to monitor the possibility of a recession.

In the Bloomberg survey, Indonesia is ranked 14th with a recession probability of 3%, far from Sri Lanka which occupies the first position with a recession potential of 85%, followed by New Zealand (33%). South Korea (25%), Japan (25%) and China (20%).

MOHAMED HENDARTYO

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