Higher Domestic Consumption and Inflation during Ramadan and Lebaran
Bayu Krisnamurthi, Indonesian Deputy Trade Minister, expects that domestic consumption will rise by approximately 40 percent during the holy Islamic fasting month of Ramadan, which starts on 28 June 2014, and subsequent Idul Fitri (Lebaran) celebrations. Traditionally, this period of festivities brings along inflationary pressures as consumers spend more money on food, transportation, clothes and souvenirs. Moreover, Krisnamurthi stated that the center of consumption will shift to the regions.
Towards the end of the Ramadan month - just ahead of the start of Idul Fitri -, Indonesians living in the major cities tend to visit their places of origin for a number of days. Jakarta, for example, becomes a 'ghost city' during Lebaran as millions of people leave the city. As a result, consumption shifts to the regions.
During Ramadan Indonesian business life will continue as normal although productivity declines as people fast, but from 28 July to 1 August 2014 Indonesian financial markets will be closed for one week.
Prices are expected to increase between 1 and 3.5 percent during the Ramadan.