While in May 2021 Indonesian inflation accelerated more than we had predicted, in June 2021 we saw the opposite: inflation eased much more than we had anticipated. In fact, Indonesia experienced deflation.
The latest consumer price index data released by Indonesia’s Statistical Agency (in Indonesian: Badan Pusat Statistik or BPS) show that deflation touched 0.16 percent month-on-month (m/m) in June 2021; the country’s deepest level of deflation since September 2019.
While it is common to see deflation in the period after the Ramadan and Idul Fitri celebrations have ended, we do wonder whether we will see the return of a multiple-month deflation streak for Indonesia as happened in July, August and September 2020. After all, the Indonesian government has imposed tougher restrictions in the economic centers of Java and Bali to combat the growing number of COVID-19 cases. While these emergency measures are planned to last until 20 July 2021, we doubt to see a significantly improving public health situation in the next two weeks, and so these emergency measures – that are believed to curb consumption significantly and thus allow deflation – may be extended.
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