RI ECONOMY MAY EXPERIENCE DEFLATION AGAIN IN JANUARY

Pontianak, W Kalimantan, Jan 22 (ANTARA) - The Central Board of Statistics (BPS) has predicted Indonesia may experience another deflation in January as a result of fuel oil cuts announced by the government on January 15.
"Usually, a cut in fuel oil prices will have an impact on deflation. Should there be inflation it will be very small," BPS chief Rusman Heriawan said here on Thursday.
He said that there was a great potential for the deflation to occur at 0.04 percent on the national scale this month.
From the economic view point, the cuts in the fuel oil prices will offset inflation in January and cause for a deflation. Heriawan said that fuel oil price cuts affected the prices of basic necessaries.
"Most of basic necessaries are distributed through transportation which need fuels such as diesel oil," he said.
The lowering of fuel oil prices three time in a relatively short period was expected to help lower the prices of essential goods, he said.
He said that if a deflation took place it would indicate that regional and national economies had developed better.
"But continuous deflation is not good either," he said.
BPS said early this month, Indonesia recorded a deflation of 0.04 percent in December 2008, bringing the year-on-year inflation rate to 11.06 percent.
"The deflation was fueled by a decline in transportation fares as well as in the prices of consumer goods and financial services," Deputy BPS Chief for Statistics, Distribution and Services Ali Rosidi told a press conference recently.
He said 27 of the 66 cities surveyed saw deflation last month with the lowest deflation of 0.4 percent recorded in Pekanbaru and Balikpapan and the highest deflation of 1.84 percent in Ambon.
The other 39 cities suffered inflation with Tarakan in East Kalimantan recording the highest inflation of 1.08 percent and Probolinggo in East Java the lowest inflation of 0.2 percent.
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