Indonesia's Joko Widodo warns of inflation risk from Ukraine crisis

People queue for groceries at a government-run market in Jakarta on March 11, 2022. PHOTO: EPA-EFE

JAKARTA (REUTERS) - Indonesian President Joko Widodo on Friday (March 11) 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 per cent at the lower end of the central bank's 2 per cent to 4 per cent target range.

However, Mr Widodo 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?" Mr Widodo 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.

Mr Widodo 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," Mr Widodo said.

Bank Indonesia and the government would mitigate upside risks to inflation by aiming to control volatile food inflation within a 3 per cent to 5 per cent 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 per cent earlier this year.

Local media has also reported rising prices of soy-based tempeh and tofu, as well as sugar, beef, and other foodstuff.

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