Indonesia’s Central Statistics Agency (BPS) announced on Monday (01/12) that the country’s inflation figure accelerated to 6.23 percent year-on-year (y/y) in November 2014 (from 6.23 percent y/y in the previous month) due to the impact of higher subsidized fuel prices implemented by the Indonesian government. On 18 November, prices for subsidized fuels (low-octane gasoline and diesel) were raised by more than 30 percent in a bid to reallocate public spending from fuel consumption to productive long-term development.

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Indonesia’s inflation figure this October may reach the highest level in five years primarily due to volatile food prices triggered by drought in several parts of Indonesia. Chili, in particular, has shown a widening gap between domestic demand and production thus adding inflationary pressures in Southeast Asia’s largest economy. The country’s central bank expects that the inflation figure may reach 0.4 percent (month-on-month, m/m), considerably higher than the historic average in October.

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The pace of inflation in Indonesia may reach 0.36 percent month-to-month (m/m) in October 2014, slightly higher than inflation in the preceding month (0.27 percent m/m). This forecast for October inflation is higher than this month’s historic average. Usually October tends to show low inflation or deflation as the harvest season commences and other inflationary pressures have also eased after the inflation peak in the June-August period (brought about by seasonal matters such as Islamic celebrations and the start of the new school year).

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The latest Bank Indonesia survey on the topic of inflation suggests that Indonesia’s inflation pace in August 2014 is still relatively safe. Based on the survey, which monitored inflation in Southeast Asia’s largest economy up to the third week of the month and which usually forms a good indicator for the inflation figure at the month-end, Indonesian inflation in August will be lower than the 0.93 percentage point (month-to-month) of inflation recorded in the previous month. Inflation in Indonesia always shows a peak around in the period June to August.

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On Monday (04/08), Statistics Indonesia (BPS) announced that the July 2014 inflation figure was 0.93 percent (month-on-month), considerably higher than the 0.43 percent of inflation in the previous month but significantly lower than the 3.29 percent inflation recorded in July last year (when inflation accelerated sharply due to higher subsidized fuel prices implemented by the government in June 2013). Head of BPS Suryamin stated that food prices contributed most to the July inflation pace, followed by instant food, drinks, cigarettes and tobacco.

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The pace of Indonesian inflation in July 2014 is expected to be in the range of 0.60 to 0.75 percent (month-on-month). If realized, this would be one of the lowest July inflation figures in recent Indonesian history. Traditionally, the month of July brings high inflationary pressures as consumers spend more on food products and other consumer goods as well as transportation amid the holy fasting month of Ramadan and subsequent Idul Fitri celebrations (which also involves the mudik tradition).

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Deputy Governor of Indonesia’s central bank (Bank Indonesia), Mirza Adityaswara, expects that inflation in July 2014 will reach between 0.8 and 0.9 percent (month-to-month). If realized, this would be relatively mild inflation amid a month that is traditionally characterized by high inflationary pressures due to the impact of the holy Muslim fasting period (Ramadan) and Idul Fitri celebrations. In this period Indonesian consumers always increase purchases of food and other consumer products such as clothes and shoes.

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Bank Indonesia Governor Agus Martowardojo expects that inflation in July 2014 will be under control. However, there are several factors that trigger inflationary pressures. These include the holy Islamic fasting month Ramadan and subsequent Idul Fitri celebrations at the month-end, as well as higher electricity tariffs and the start of the new school season (inflation in July is traditionally higher than in other months due to seasonal factors). Martowardojo still believes that the year-end inflation target 3.5 to 5.5 percent can be achieved.

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On Tuesday morning (01/07), Chief Statistician at Statistics Indonesia (BPS) Dr. Suryamin announced that inflation rose 0.43 percent (month-on-month) in June 2014. The foodstuff component provided highest inflationary pressures in the past month. On a year-on-year basis, headline inflation eased to 6.70 percent from 7.32 percent in May 2014. Calender year inflation (up to June 2014) rose to 1.99 percent. Later today, Indonesia Investments will publish an analysis of June inflation.

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The central bank of Indonesia (Bank Indonesia) expects to see a trade deficit in the month of April 2014 due to a significant increase of imports (around 11 percent month-to-month), while prices of a number of important export commodities have been under pressure (including coal and crude palm oil). Governor of Bank Indonesia Agus Martowardojo said that weak demand from China impacts negatively on the trade balance. Bank Indonesia's statement contradicts the institution's earlier statement which hinted at a surplus of USD $600 million in April.

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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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