Bank Indonesia: Consumer Confidence in Indonesia Remains Strong
Indonesian consumer confidence continued to grow in March 2014. According to the latest survey of Indonesia's central bank (Bank Indonesia), the country's consumer confidence rose to 118.2 in March from 116.2 one month earlier. Indonesians are particularly optimistic about domestic economic conditions over the next six months, evidenced by a 3.2 point rise in the Consumer Expectations Index to 123.9 points. Increasing consumer confidence is positive for household consumption, an important pillar of Indonesia's economic growth.
Household consumption accounts for about 55 percent of total economic growth in Indonesia. As Indonesia is characterized by a rapidly expanding middle class, this rising consumer force is a vital asset to the economy.
The survey also showed that Indonesian consumers expect prices to increase (inflation) in three to six months time from now. This expectation is based on assumed higher demand ahead of the start of the Islamic fasting month (Ramadan) in late June 2014.
Meanwhile, Deputy Governor of Bank Indonesia Halim Alamsyah said that strong capital inflows will push the country's foreign exchange reserves higher in April. These reserves are estimated to have reached USD $102.5 billion in late March 2014, slightly down from the previous month (USD $102.74 billion). The slight decline in March is caused by debt repayments.
Primary reasons for strong capital inflows are Indonesia's improved economic fundamentals, evidenced by the easing inflation pace (7.32 percent year-on-year in March 2014) and the country's February 2014 trade surplus (USD $785.3 million).