The main inflationary pressures in 2017 stem from administered price adjustments as the central government cut electricity subsidies in its bid to further curb energy subsidies and find more funds for structural investment, such as infrastructure and social development in Indonesia. Also the higher tax for vehicle registration added some inflationary pressures this year.

Meanwhile, Bank Indonesia Governor Agus Martowardojo stated that food prices are under control in Indonesia. Provided these prices remain under control, then it should be relatively easy for the nation's inflation rate to achieve the target.

Bank Indonesia's latest full-year inflation target for Indonesia is in line with the World Bank's latest forecast of 4.3 percent (y/y), while the International Monetary Fund put its latest inflation outlook for Indonesia at 4.5 percent (y/y) in 2017.

Indonesia's Chief Economics Minister Darmin Nasution said it is important for inflation to remain low as that would push credit rates lower and thus encourage demand for credit in Southeast Asia's largest economy.

Inflation in Indonesia:

Month M/M Growth
      2013
M/M Growth
      2014
M/M Growth
      2015
M/M Growth
      2016
M/M Growth
      2017
January      1.03%      1.07%     -0.24%      0.51%      0.97%
February      0.75%      0.26%     -0.36%     -0.09%      0.23%
March      0.63%      0.08%      0.17%      0.19%     -0.02%
April     -0.10%     -0.02%      0.36%     -0.45%      0.09%
May     -0.03%      0.16%      0.50%      0.24%      0.39%
June      1.03%      0.43%      0.54%      0.66%
July      3.29%      0.93%      0.93%      0.69%
August      1.12%      0.47%      0.39%     -0.02%
September     -0.35%      0.27%     -0.05%      0.22%
October      0.09%      0.47%     -0.08%      0.14%
November      0.12%      1.50%      0.21%      0.47%
December      0.55%      2.46%      0.96%      0.42%
Total      8.38%      8.36%      3.35%      3.02%

Source: Statistics Indonesia (BPS)

Inflation in Indonesia and Central Bank (BI) Target 2008-2016:

  2008 2009 2010 2011 2012 2013 2014 2015 2016
Inflation
(annual % change)
 9.8  4.8  5.1  5.4  4.3  8.4  8.4  3.4  3.0
BI Target
(annual % change)
 5.0  4.5  5.0  5.0  4.5  4.5  4.5  4.0  4.0

Source: Bank Indonesia

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