REPUBLIKA.CO.ID, JAKARTA - Indonesia's inflation rate this year may exceed the target of 5.3 percent in the revised 2014 state budget if the government increases the price of subsidized fuel, Statistics Indonesia (BPS) official said.

"If there is a fuel price hike, the inflation rate will most likely exceed six percent," BPS Deputy Chief for Distribution and Service Statistics, Sasmito Hadi Wibowo, said on Monday.

Wibowo added that a subsidized fuel price hike of 3,000 IDR per liter will contribute 1.7 percent to the inflation rate, in addition to the inflation caused by hikes in transport fares and food.

"If it had been raised on November 1, it would have directly contributed 1.72 percent to the inflation. Now, as the announcement on the fuel price hike has been postponed, it will directly contribute less than 1.7 percent. The indirect impact of the hike, however, will depend on the commodities affected by hikes in transport fares," he explained.

Usually, inflation rates were high at the end of the year due to Christmas and New Year celebrations, the BPS official noted. So ideally, the price of subsidized fuel should have been raised in November as it would have reduced its impact on the inflation rate.

"I don't believe it (price of subsidized fuel) will be raised in December because Christmas and New Year celebrations will already contribute to the inflation rate. Inflation rate in December is usually close to 1 percent. So if another 1.7 percent is added to it, then what will the inflation rate be? The rate in November is at a five-year low. And I think the public is prepared for a fuel price hike now," Wibowo stated.

The price of subsidized fuel was last raised by the government at the end of June 2013 by 2,000 a liter. The fuel price hike had contributed 3.29 percent to the July 2013 inflation, which brought the year-end inflation rate to 8.38 percent.

The calendar inflation in the January-October period this year was recorded at 4.19 percent, and the year-on-year inflation rate hit 4.83 percent. Bank Indonesia has predicted that the inflation rate will be recorded at 4.5, plus/minus one, percent this year without any fuel price hike.

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