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Indonesia: New import tax could mean higher inflation: Indef
An economist at the Institute for Development of Economics and Finance (Indef) has said the government policy on imposing a higher import tax on foreign-made products would push up prices and thus increase inflation.
Indef economist Bhima Yudhistira also expressed pessimism that the policy would push down the current account deficit (CAD) at its present figure of 3 percent of gross domestic product (GDP).
“The total value of the 1,147 imported goods was US$5 billion from January to August. This is only 5.5 percent of all non-oil and gas imports,” Bhima said on Thursday as quoted by tribunnews.com. He was referring to the imported goods that would be imposed with the higher import tax.
Bhima said that even with the higher import tax, local retailers and distributors would find a way to import the goods and adjust consumer-level prices.
“If substitutions are not available to consumers, they will be forced to buy [the imported products] at higher prices,” said Bhima, and that this would increase inflation in November and December.
“Hopefully, it will not exceed 3.7 percent, because [higher inflation] would erode purchasing power,” he added.
In contrast, Trade Minister Enggartiasto Lukita said the new import tax policy would not significantly affect inflation, as he believed that consumers would turn to cheaper, domestic products. For example, consumer goods like soap, cosmetics, shampoo and other household products could be substituted with local products.
“[If goods are still imported], it would not be much. So [the policy] will not significantly affect inflation,” Enggartiasto said as quoted by Antara. (bbn)
Source: http://www.thejakartapost.com/news/2018/09/07/new-import-tax-could-mean-higher-inflation-indef.html