Inflation Update Indonesia: 0.36% of Deflation in February
Today (02/03), Statistics Indonesia (BPS) announced that Indonesia’s annual inflation eased further in February. Last month, inflation in Southeast Asia’s largest economy cooled to 6.29 percent year-on-year (y/y) - from 6.96 percent (y/y) in the preceding month - amid falling fuel prices as well as falling food prices (particularly chili) despite inflationary pressures triggered by higher rice prices. On a month-to-month (m/m) basis, Indonesia recorded 0.36 percent of deflation in February, the second straight month of deflation.
Although a drop in annual inflation was expected, the 6.29 percent (y/y) figure means that inflation eased more than was expected by analysts. Easing inflation in Indonesia was also the main reason why the country’s central bank (Bank Indonesia) was able to cut its benchmark interest rate (BI rate) by 25 basis points to 7.50 percent in mid-February, a move that weakened the Indonesian rupiah rate but is expected to provide room for accelerated economic growth (which had fallen to a five-year low at 5.02 percent y/y in 2014).
Indonesia’s core inflation (which excludes administered as well as volatile food prices) eased slightly to 4.96 percent (y/y) in February from 4.99 percent the previous month.
At the end of 2014 Indonesian inflation accelerated sharply due to the government's decision to raise prices of subsidized fuels. At the start of 2015, however, the government was able to reform its fuel subsidy policy (significantly reducing fuel subsidies altogether) amid low global oil prices, implying lower fuel prices and easing transportation costs.
Inflation in Indonesia:
| Month | Monthly Growth 2013 |
Monthly Growth 2014 |
Monthly Growth 2015 |
| January | 1.03% | 1.07% | -0.24% |
| February | 0.75% | 0.26% | -0.36% |
| March | 0.63% | 0.08% | |
| April | -0.10% | -0.02% | |
| May | -0.03% | 0.16% | |
| June | 1.03% | 0.43% | |
| July | 3.29% | 0.93% | |
| August | 1.12% | 0.47% | |
| September | -0.35% | 0.27% | |
| October | 0.09% | 0.47% | |
| November | 0.12% | 1.50% | |
| December | 0.55% | 2.46% | |
| Total | 8.38% | 8.36% | -0.61% |
Source: Statistics Indonesia (BPS)
Inflation in Indonesia 2008-2014:
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
| Inflation (annual percent change) |
9.8 | 4.8 | 5.1 | 5.4 | 4.3 | 8.4 | 8.4 |
Source: World Bank