17 February 2020 (closed)
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Indonesia's inflation rate eased more than analysts had forecast in March 2017. Based on the latest data from Indonesia's Statistics Agency (BPS), Indonesian inflation fell to an annual rate of 3.61 percent (y/y) on the back of a monthly deflation rate of 0.02 percent in March 2017. The outcome also surprised Indonesia's central bank (Bank Indonesia). Up to the third week of March a Bank Indonesia survey showed inflation reached 0.05 percent.
The Bank Indonesia survey is usually a good indicator for full-month inflation as normally few things change in the last week. However, in March 2017 there was a sudden drop of several commodity prices - particularly rice, chilli and eggs - in the last week of the month. Also tariffs for mobile phone voice messages as well as transportation fares reportedly fell causing deflation in the full-month.
Meanwhile, Indonesia's core inflation, which excludes administered and volatile food prices, decelerated to 3.30 percent (y/y) in March 2017. Calendar year inflation (January-March 2017) in Indonesia now stands at 1.19 percent, while annual inflation (April 2016-March 2017) cooled to 3.61 percent. This is still well within Bank Indonesia's target range of 3 - 5 percent (y/y) in 2017. However, ongoing electricity price subsidy adjustments are expected to cause some additional inflationary pressures in the coming months.
In the January-February 2017 period electricity prices for 900-VA households in Indonesia rose 31 percent. In the second phase of the program, in March 2017, prices were raised by 32.7 percent. Lastly, in the May-June 2017 period electricity prices will increase by 42.9 percent. Afterwards, starting from 1 July 2017, these 900-VA subscribers group will be subject to an auto-adjusted electricity tariff scheme just like the other 12 non-subsidized customer groups.
If we take a look at the table below it is visible that Indonesia usually experiences deflation in April. This is caused by the start of the big harvest season. With a major boost on the supply-side, Indonesia's food prices tends to fall. However, given the administered price adjustments (electricity tariffs) there are chances of modest inflation this April.
Inflation in Indonesia:
Source: Statistics Indonesia (BPS)
Inflation in Indonesia and Central Bank (BI) Target 2008-2016:
(annual % change)
(annual % change)
Source: Bank Indonesia