Indonesia's April deflation of 0.02 percent was mainly supported by a sharp decline of prices in the volatile foods group (compared to the average inflation in the last six months). These declining food prices were the result of abundant crops supply due to the peak of the harvest season, in particular commodities such as rice, shallots, red peppers as well as cayenne peppers. Usually the months of April and May bring deflation or low inflation due to the harvesting of crops.

Meanwhile, core inflation has been under control supported by the relatively stable rupiah exchange rate and the relatively low pressures from global prices. As such, pressure from administered price inflation was under control in April 2014.

Bank Indonesia still expects to achieve the inflation target of 4.5±1 percent by the year-end, followed by 4.0±1 percent in 2015. However, some risks loom. For example, potential food price increases due to the start of the dry season in some regions as well as the possible emergence of a new El Nino cycle in the second half of 2014.

Inflation in Indonesia:

Month  Monthly Growth
          2013
 Monthly Growth
          2014
January          1.03%          1.07%
February          0.75%          0.26%
March          0.63%          0.08%
April         -0.10%         -0.02%
May         -0.03%  
June          1.03%  
July          3.29%  
August          1.12%  
September         -0.35%  
October          0.09%  
November          0.12%  
December          0.55%  
Total          8.38%          1.39%
    2008   2009   2010   2011   2012   2013
Inflation
(annual percent change)
   9.8    4.8    5.1    5.4    4.3    8.4

Source: Statistics Indonesia

Indonesia's Trade Balance of March 2014

Data from Statistics Indonesia (released on Friday 2 May 2014) show that Indonesia’s trade balance in March 2014 recorded another surplus (USD $0.68 billion), resulting in easing pressures on Indonesia's current account deficit. In the previous month the country had recorded a surplus amounting to USD $0.84 billion. As such, Indonesia's trade balance recorded a surplus of USD $1.07 billion in the first quarter of 2014.

The March 2014 trade balance was supported by the increasing surplus in the country's non-oil & gas trade balance. This surplus increased from USD $1.57 billion in February 2014 to USD $2.05 billion in March 2014 due to higher foreign demand.

By components, improvement in non-oil & gas exports in March were mainly due to increased commodity exports of mineral fuels, vegetable oils, and electric machines & equipment, growing by 14.8 percent (mtm), 12.1 percent (mtm), and 6.4 percent (mtm) respectively. Similarly, exports of machinery & mechanical appliances grew positively at 5.26 percent (mtm) after recording negative growth of 24.2 percent (mtm) in February.

However, non-oil & gas imports slightly increased by 1.9 percent (mtm) after a contraction of 9.1 percent (mtm) in February 2014. Meanwhile, increases in non-oil & gas imports in March 2014 was primarily affected by growth in imports of iron & steel, plastics & plastic goods, and cereal, which increased by 4.1 percent (mtm), 5.1 percent (mtm), and 20.8 percent (mtm) respectively.

The March 2014 trade surplus was constrained by the country's increasing deficit in the oil & gas trade balance. The deficit in Indonesia's oil & gas trade balance increased from USD $0.73 billion in February 2014 to USD $1.37 billion in March 2014, primarily the result of oil & gas imports, which increased by 15.8 percent (mtm), the increase in crude oil imports and oil products, growing 33.2 percent (mtm) and 15.0 percent (mtm) respectively, in March 2014.

Meanwhile, oil & gas exports in March 2014 declined by 3.2 percent (mtm), particularly due to lower gas exports, declining by 11.6 percent (mtm).

Bank Indonesia is optimistic about the country's trade balance for the foreseeable future, particularly amid an improving global economy. It expects the overall current account deficit to moderate further to below the 3 percent of gross domestic product mark.

Indonesia's Trade Balance 2014 (in billion US Dollar):

2014                              Export                              Import
Month   Oil & Gas   Non Oil & Gas   Total   Oil & Gas
  Non Oil & Gas   Total
January       2,50          11,97   14,47       3,55          11,37   14,92
February       2,73          11,90   14,63       3,46          10,33   13,79
March       2,64          12,57   15,21       4,01          10,53   14,54
Jan-Mar       7,87          36,45   44,41      11,02          32,22   43,25

Indonesia's Trade Balance 2013 (in billion US Dollar):

2013                              Export                              Import
Month   Oil & Gas   Non Oil & Gas   Total   Oil & Gas
  Non Oil & Gas   Total
January       2,66          12,72   15,38       3,97          11,48   15,45
February       2,57          12,45   15,02       3,64          11,67   15,31
March       2,93          12,09   15,02       3,90          10,99   14,89
April       2,45          12,31   14,76       3,63          12,83   16,46
May       2,92          13,21   16,13       3,43          13,23   16,66
June       2,80          11,96   14,76       3,53          12,11   15,64
July       2,28          12,81   15,09       4,14          13,28   17,42
August       2,72          10,36   13,08       3,67           9,34   13,01
September       2,41          12,29   14,70       3,72          11,79   15,51
October       2,72          12,99   15,70       3,47          12,20   15,67
November       2,77          13,17   15,94       3,70          11,21   15,15
December       3,41          13,58   16,98       4,22          11,24   15,46
Jan-Dec      32,63         149,93  182,57       45,27         141,36  186,36

Source: Statistics Indonesia

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