Most analysts and government officials see Indonesian inflation accelerating this year after a mild 2016 in which Indonesia's consumer price index rose by 3.02 percent year-on-year (y/y) only. Indonesian Chief Economics Minister Darmin Nasution said low inflation in 2016 was primarily caused by low administered price growth (in a couple of months administered prices in fact fell last year) as well as controlled food prices. He added, however, that food prices have been rather volatile and are expected to remain volatile in 2017.

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According to the latest data from Indonesia's Statistics Agency (BPS), full-year inflation reached 3.02 percent in 2016, just within the 3 - 5 percent year-on-year (y/y) target range that was set by the central bank of Indonesia (Bank Indonesia). The 3.02 percent growth was the lowest annual inflation figure of Indonesia since 2012. In December 2016 Indonesia's consumer price index rose by 0.42 percent month-to-month (m/m), one of the lowest monthly (December) growth paces over the past decade.

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On 25 December 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve political, social and economy-related topics such as the performance of Indonesian stocks and the rupiah, infrastructure, radical Islam, palm oil, inflation, credit ratings, the visa-free facility, and more.

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The central bank of Indonesia (Bank Indonesia) expects inflation to reach the range of 0.50-0.60 percent month-on-month (m/m) in December 2016 as Christmas and New Year celebrations, traditionally, give rise to higher consumer spending. The projection would also imply that full-year inflation will fall well within Bank Indonesia's target range of 3.0 - 5.0 percent (y/y) in 2016 (year-to-date, Indonesian inflation has accumulated to 2.59 percent), the second straight year of mild inflation (for Indonesian standards).

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Inflation in Indonesia accelerated to 3.58 percent year-on-year (y/y) in November 2016, from 3.31 percent (y/y) in the preceding month. Acceleration of Indonesian inflation last month was faster than expected, with estimates averaging 3.43 percent (y/y). On a month-on-month (m/m) basis inflation rose by 0.47 percent in November. Indonesia's Statistics Agency (BPS) announced the country's latest inflation data just before noon on Thursday (01/12).

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Statistics Indonesia (BPS) announced that inflation in Indonesia was recorded at 0.14 percent month-on-month (m/m) in October 2016, slightly higher than had been expected by analysts but lower compared to the 0.22 percent (m/m) of inflation that was reported in the preceding month. Meanwhile, on an annual basis (y/y), Indonesia's inflation rate accelerated to a seasonally adjusted 3.31 percent (y/y) in October, from 3.07 percent (y/y) in the preceding month.

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According to the latest survey of Indonesia's central bank (Bank Indonesia), consumer confidence in Southeast Asia's largest economy fell 3.3 points to 110 in September 2016 (a reading above 100.0 indicates optimism). Consumer confidence somewhat weakened as the Indonesian people expect upward price pressures at the year-end, specifically rising prices of processed food, beverages, cigarettes, tobacco and groceries. Meanwhile, respondents also expect to put less money in savings in the next six months.

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Indonesia's consumer price index (CPI) expanded 3.07 percent year-on-year (y/y) in September, up from the 2.79 percent (y/y) pace in the preceding month but remaining at a comfortably low level (for Indonesian standards). According to data from Statistics Indonesia (BPS), released earlier this morning (03/10), Indonesia's monthly inflation rate was 0.22 percent in September 2016, roughly in line with analysts' forecasts and the low inflation environment could be a reason for the central bank to cut its key interest rates again later this year.

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The central bank of Indonesia (Bank Indonesia) stated that up to the third week of August deflation reached 0.06 percent month-to-month (m/m). Juda Agung, Executive Director at Bank Indonesia's Economic and Monetary Policy Department, said consumer demand has diminished after previously peaking during the Islamic Ramadan and Idul Fitri celebrations in June and July. Usually the month of August sees inflationary pressures (caused by the new school year). This year, however, it may be the first time in many years that August brings deflation.

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After six years of steady decline, the Indonesian rupiah is likely to have appreciated against the US dollar at the end of 2016. So far this year, the currency of Indonesia has appreciated 4.8 percent to IDR 13,126 against the greenback (Bloomberg Dollar Index) supported by capital inflows, particularly into government bonds and stocks as well as the delay in further monetary tightening in the USA. Although the rupiah should depreciate a bit as we go towards the end of the year, it is set to finish the year at a stronger level than it started.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the November 2013 edition, a number of important issues that are monitored include Indonesia's inflation rate, the trade balance, the current account deficit, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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Indonesia's Finance Minister Chatib Basri stated that the government of Indonesia is busy preparing three new policies that aim to restore financial stability as well as attract foreign direct investments. These three new policies involve the higher sales tax on imported luxury cars, a revision of Indonesia's negative investment list, and the higher income tax on imported consumption goods. These three new policies are in addition to the policy package that was introduced by the Indonesian government in August 2013.

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The inflation rate of Indonesia rose slightly in November 2013 (month-to-month) and confirms estimations that inflation in Southeast Asia's largest economy is under control after having accelerated sharply due to the introduction of higher subsidized fuel prices June 2013. In recent months, inflation moved sideways and is expected to ease considerably in the first quarter of 2014. Indonesia's consumer price index rose 0.12 percent in November due to rising electricity, processed foods and health care costs.

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The benchmark stock index of Indonesia (known as the Jakarta Composite index or IHSG) was able to continue its rise on Monday (02/12), supported by economic data released by Statistics Indonesia. Although Indonesia's November inflation rate (0.12 percent) was slightly higher than previously expected, investors were content with the result. Moreover, Indonesia's October trade balance showed a (limited) surplus of USD $42.2 million, constituting a sharp improvement from the large deficit in the previous month.

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The government of Indonesia will release two additional fiscal policy packages at the end of November or start of December that both aim to heal Indonesia's current account deficit. The two packages constitute follow ups of the policy package that was released in August 2013. Previously, deputy minister of Finance, Bambang Brodjonegoro, announced that an additional package would be released in October. However, it turned out that the government needed some more time to prepare the two additional packages.

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On Thursday 14 November 2013, Agus Martowardojo, Governor of Indonesia's central bank (Bank Indonesia), delivered his end-of-the-year speech at the Annual Bankers’ Dinner. The meeting was attended by leaders from Indonesia's House of Representatives (DPR), economic ministers, leaders of the country's banking industry and business community, non-ministerial government agencies as well as a number of international institutions, thus representing a strategic forum in terms of the national economy.

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Indonesia's benchmark stock index (IHSG) was not able to continue its rebound. On Friday (15/11), the IHSG fell 0.73 percent to 4,335.45 points amid widespread profit taking. Foreign investors recorded net selling of IDR 193 billion (USD $16.9 million) on today's trading day. Moreover, investors are concerned about the impact of the higher interest rate of the central bank (7.50 percent), particularly on the property and banking sectors in the fourth quarter of 2013.

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Despite rising concerns about the slowing pace of the Indonesian economy, the deputy minister of Finance Bambang Brodjonegoro reminded investors that Indonesia's economic growth in the third quarter of 2013 still constitutes one of the highest growth rates around the globe. Economic expansion in Q3-2013 slid to 5.6% in Southeast Asia's largest economy. With the exception of China (7.8% GDP growth in Q3-2013), Indonesia's growth continues to outpace growth in other emerging markets, such as Brazil (3.3%) and Turkey (4%).

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Five more new public listings are expected on the Indonesia Stock Exchange (IDX) in the remainder of 2013 despite the current less rosy macroeconomic environment in Indonesia. The companies that are expected to conduct their initial public offering (IPO) are Indomobil Multi Jasa, Dwi Aneka Jaya Kemasindo, Blue Bird, Soechi Lines, and Sawit Sumbermas Sarana. So far this year, 26 Indonesian companies went public on the IDX. At the start of the year, the IDX targeted for at least 30 new listings in 2013.

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Laju IHSG yang awalnya hanya melemah tipis dan mencoba untuk rebound, jelang sore hari berubah menjadi pelemahan setelah dipersuram oleh hasil RDG BI yang menaikkan BI rate dari level 7,25 persen menjadi 7,5 persen. Kenaikan BI rate ini tentunya dipersepsikan bahwa kondisi makroekonomi Indonesia yang belum akan membaik dan terutama timbul juga penilaian bahwa masih akan tingginya inflasi hingga akhir tahun.

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