Flip Globe | 12 September 2023
By : Rizqi Akbar
Inflation is one of the many factors affecting Indonesia's economy, which is one of the biggest of all Southeast Asian countries. The inflation rate also plays a significant role in helping to shape the nation and its citizens' well-being. Therefore, in this article, we will explore the idea of inflation, its rate in Indonesia, and how it affects Indonesians' daily life.
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Source : Envato
Inflation is a rise in the prices of products and services over time. The currencies of all countries across the globe, in this example, the Indonesian rupiah, are worth less when inflation occurs.
That is comparable to a steady decrease in money's purchasing power. The Consumer Price Index (CPI), which tracks fluctuations in the median price of products and services purchased by households, is a typical tool for measuring this phenomenon.
While moderate inflation is typically considered to be favorable for investment and growth of the economy, it's the other way for excessive inflation. It can have grave adverse effects on the nation's economy and the livelihoods of the citizens.
Source : Envato
As of the latest available data from Bank Indonesia in June 2023, Indonesia's inflation rate is 3.53%. This figure shows a gradual decrease compared to previous months in 2023. In addition, this number also indicates the CPI's year-over-year (yoy) change, which shows the overall pricing trends for goods (products and services) in a country.
Authorities, companies, and even individuals regularly pay attention to the inflation rate, a key economic indicator to know the recent country's financial state. Much like in other countries, inflation rates in Indonesia are impacted by a number of factors, such as:
Source : Envato
The impact of inflation goes far beyond mere economic theories; it directly affects the lives of Indonesians in so many ways. Let's take a closer look at how inflation affects their daily lives:
1. Increased cost of living
The entire cost of life skyrockets as product and service costs increase. Basic necessities like food, housing, healthcare, and even transportation become more expensive, putting a strain on budgets for households. Families with lower incomes may need help to make ends meet, leading to financial issues.
2. Savings depreciation
The value of money saved in conventional bank accounts over time will slowly decrease due to inflation. Let alone savings account with a low-interest rate; they will be unable to keep up with inflation.
People with many savings accounts will eventually discover that their money doesn't go as far as it previously did. As a result, they will have to start looking for other strategies to preserve their hard-earned money's value.
3. Wage-price spiral
The wage-price spiral is a cycle that can be triggered by inflation. Workers may seek more pay when living costs skyrocket. Despite the fact that pay increases may offer only short-term comfort if they are not followed with more productivity and economic development, they could lead to grave effects of inflation, such as a recession.
4. Implications for monetary policy
Central banks, in this case, Bank Indonesia, employ various monetary policy measures, such as changing interest rates to control inflation. These changes have an impact on spending and loan patterns, which may have an effect on spending by consumers and growth in the economy.
5. Considerations for investment
Investment choices are heavily impacted by inflation. To keep and increase the value of their assets, investors often look for investment instruments that can beat inflation. They usually seek more secure investments like gold, which are often seen to be less prone to inflation impact.
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In conclusion, the current inflation rate in Indonesia still affects the citizens' everyday lives, despite the fact that it is steadily decreasing. Individuals and business owners might consider using financial services like Flip Globe to handle inflation and international transaction difficulties.
With Flip Globe by Flip, international transactions from Indonesia to over 40 countries become more efficient and effective. This offers a practical option for handling money transactions in a dynamic global economy.