Inflation: in June 2014 headline inflation or CPI was recorded at 0.43 percent (month-on-month/mom), which was slightly lower compared to the seasonal pattern of around 0.50 percent due to the Ramadan season (holy Islamic fasting month). This could be on account of better management of the food supplies ahead of Ramadan. This therefore resulted in year-on-year (yoy) inflation to ease to 6.70 percent as compared to 7.32 percent in the previous month, which was due to high base effect (1.02 percent mom inflation in June 2013). Core inflation declined slightly to 4.81 percent from 4.82 percent in May 2014.

Trade Balance: the trade balance recorded a marginal surplus of USD $69.9 million in May 2014, as compared to the deficit of USD $1.96 billion in April. This is mainly on account of a greater decline in imports as compared to exports. While imports fell by 11.4 percent yoy, exports fell lower than commensurate levels, viz 8.1 percent yoy. The decline in exports was driven by a drop in exports of oil & gas. This decline was shielded by a relative increase in crude palm oil (CPO) exports, which witnessed a recovery from the previous month (73 percent mom). Within overall imports, crude oil imports that rose by 21 percent (mom) were countered by decline in other imported commodities. Capital goods declined by 11 percent (mom) and raw materials also declined by 9 percent mom signalling a continued slowdown in the economy.

Foreign Exchange Reserves: by the end of June 2014, the country’s foreign exchange reserves have expanded marginally to USD $107.7 billion from USD $107 billion in May. These reserves are sufficient to finance the country’s imports and debt repayments over the next six months, which exceeds the international standard of a minimum level of three months.

Jakarta Composite Index (JCI): the JCI closed at 4,878.58 points on 30 June 2014, which is almost flat compared to 30 May when it closed at 4,893.15 points. During the month it had remained broadly range bound, reaching a monthly high at 4,971.95 on 11 June and thereafter steadily declining. Mainly, this can be attributed to market uncertainty brought on by the presidential election outcome. On 10 July, however, it reached 5,098.01 based on speculation that Joko Widodo will win the country's presidential election.

BI Rate: the central bank decided to hold the benchmark rate (BI rate) at 7.50 percent in July. The bank has maintained this rate since November 2013. The monetary policy is expected to remain hawkish in line with the objective of controlling the current account deficit, and maintaining the rupiah exchange rate as well as inflation at steady levels.

Rupiah: the Rupiah witnessed a substantial decline, closing at IDR 11,969 per US dollar on 30 June 2014 compared to IDR 11,611/USD at the end of May. The decline is line with all the emerging market currencies on the back of improved US macroeconomic data. Policy makers have used this opportunity to manage the trade situation (by not intervening in the market and thus letting the rupiah depreciate imports become more expensive while exports become cheaper). The rupiah closed at IDR 11,549 on 10 July and may recover further on the back of the expected election outcome.

Government Debt Program: during June 2014, the Indonesian Ministry of Finance sold bonds worth of IDR 12 trillion and IDR 8.35 trillion. These were higher than the indicative target of IDR 8 trillion each and were sold at a higher weighted average yield as compared to the earlier issues. The 10-year bonds were sold closer to 8.026 percent and 8.179 percent respectively.

10-year Government Bond: the 10-year government bond yield stood at 8.24 percent on 30 June, compared to 8.061 percent a month earlier, reflecting uncertain sentiments in the market towards the results of presidential election. As on 10 July, the yield closed at 8.023 percent indicating positive sentiments towards the election outcome.

Other News: Indonesian parliament approved a revised budget on 19 June, accommodating a larger deficit on account of an increase in spending and falls in revenues for 2014. The following are the highlights of the amendment:

o the budget deficit target was increased to 2.4 percent of gross domestic product (GDP) as compared to 1.69 percent envisaged earlier. This is an increase by 42 percent as compared to the original budget.

o the revised expected revenue has been estimated at IDR 1,635.37 trillion, lower than the approved IDR 1,667.1 trillion budgeted, whereas the expenditure estimates have been revised at IDR 1,876.87 trillion from the earlier IDR 1,842.5 trillion. As a result, the estimated deficit by the end of the year is expected to be closer to IDR 241.5 trillion as compared to the budgeted IDR 175.4 trillion.

o the revised budget has also factored in the revised GDP growth target of 5.5 percent as compared to the earlier budgeted 6.0 percent, and an exchange rate of IDR 11,600 per USD as compared to IDR 10,500 per USD among other factors.