Indonesians Urged to Spend More

The head of Indonesia’s National Development Planning Agency, or Bappenas, Bambang Brodjonegoro, has said household consumption and inflation will be the key to achieving higher economic growth in 2018.

“To ensure consistent growth, the best recipe is to maintain the rise in household consumption, while keeping the growth at 5% or more,” Bambang said as he provided directives at a Bappenas consultation gathering in Jakarta, Antara News reported.

According to Bambang, household consumption will rise only when consumers have confidence about economic outlook and spend money. He stressed that the central and regional governments should be able to ensure a perception of a normally-running economy so that people are willing to spend money.

“If people spend money (to shop), it means household consumption is increasing, which boosts economic growth. When people shop, retail trade increases, large trade also rises, and the economy registers growth”.

Meanwhile, inflation itself should be kept as low as possible. According to Bambang, controlling inflation was the most effective way of maintaining purchasing power. If inflation is allowed to erode purchasing power, he added, the growth in household consumption will also be affected.

When it comes to inflation itself, three factors can have an impact. These are a rise in food prices, change in government-set prices and core inflation. As far as core inflation is concerned, it is the task of Bank Indonesia to control the availability and demand for money. The administered price falls under the central government’s authority.

Bambang reminded that at times, two aspects can be controlled but food prices can become volatile. As a result, inflation seems higher than it should be.