Indonesia expects 2-digit inflation on fuel price hike

The sharp hike in domestic fuel prices is expected to give the strongest inflationary pressure to Indonesia, as prices have quickly started to climb since the hike was imposed Saturday, a leading economic daily reported Tuesday.

State Minister for National Development Planning Sri Mulyani Indrawati has said the inflation would hit the double digits by the end of the year, reported Bisnis Indonesia.

"Inflation expectation will grow fast ... From 9 percent we have today, it will reach 12 percent," she said.

Earlier on Monday, the Central Statistics Agency announced September 2005 inflation of 9.06 percent year-on-year, the highest level in 33 months.

The agency said the last month's inflation rate was mainly attributable to fuel shortage.

Prices of consumer goods and basic commodities have uncontrollably risen since the government announced the hike.

Producers and dealers of motor vehicles, electronics and foodstuff have raised prices by significant sizes, the newspaper said.

Transport operators are among the first to raise fares.

PT Toyota Astra Motor, the local unit of Toyota Motor Corp., has begun to increase prices of all car types by the range of 3.5 million rupiah (350 US dollars) to 25 million rupiah (2,500 dollars).

Foodstuff prices and transportation fares are very likely to double following the hike ahead of the Muslim fasting month that begins Wednesday this week.

Besides the fuel price hike, a weakening of the rupiah against the US dollar also added the inflationary pressures.

Source: Xinhua