World Bank: Food Prices in Indonesia Structurally High, Rice Very Expensive

Presiden Joko Widodo (Jokowi) — President Joko Widodo (Jokowi) at the corns harvest event in North Gorontalo in 2019. Photo: Liputan6.com/Arfandi Ibrahim

Liputan6.com, Jakarta - The World Bank releases a grim report concerning the Indonesian food sector as it contributes to inflation. The rice in Indonesia is revealed to be the most expensive among other ASEAN countries.

The rice retail prices in Indonesia are even more expensive than in Thailand, Malaysia, and Singapore, although Indonesia has lower GDP per capita.

"Food prices in Indonesia were already structurally high. Indonesia’s rice retail prices have consistently been the highest in ASEAN over the past decade—28 percent higher than prices in the Philippines, and more than double the prices in Vietnam, Cambodia, Myanmar, and Thailand," according to the World Bank's December 2022 Indonesia Economic Prospects.

The World Bank also cites multiple reasons behind the high prices, such as geographical factors and restrictive trade measures in which State-Owned Enterprises control the monopoly. Another reason is the low-investment in the agricultural sector.

"Long-term underinvestment in agricultural R&D, extension services and agricultural human capital development have held back productivity improvements that could lower food prices in the long-term," said the report.

Moreover, the World Bank also recognizes that the high food prices will contribute to poor nutritions.

"While only one percent of Indonesian households could not afford an energy-sufficient diet, one-third could not afford a nutrient-adequate diet," explained the World Bank. "This contributes to Indonesia’s poor nutrition outcomes."

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War in Ukraine

Rusia Resmi Caplok 4 Wilayah Ukraina — President Vladimir Putin formalized the Russian annexation of four Ukrainian regions on 30 September 2022. Photo: Sergei Karpukhin, Sputnik, Kremlin Pool Photo via AP

The World Bank also elaborates the external factors that lead to the increasing food price. The war in Ukraine is mentioned alongside post-pandemic demand.

While the war in Europe is contributing to the oil prices, climate affects the shortage of commodities such as rice, chilies, and shallots.

"At the global level, risks include worsening global economic conditions, a prolonged and deeper conflict in Ukraine, higher input costs and the ongoing La Niña weather pattern," said the World Bank.

"The rising climate variability will continue to pose a risk for agricultural production by increasing the likelihood of lower yields and harvest failures, exacerbating food price volatility."

President Joko Widodo recently admitted the economic conditions will worsen. He asked people to be grateful that the inflation is controlled at 5.2%

"I am not spooking you. Only reminding that the upcoming economic challenges will not get easy," said Jokowi on Monday.

"Next year, only two weeks left, the world is still haunted by COVID-19 pandemic, still haunted by the global economic uncertainty," he remarked.

Natasha Khairunissa Amani contributed to this report.