The central bank of Indonesia (Bank Indonesia) stated that the total cash outflow from the lender of last resort amounted to IDR 140 trillion (approx. USD $10.6 billion) between the start of the holy Islamic fasting month (Ramadan) in early June 2016 and the end of last week. However, Bank Indonesia had prepared IDR 160 trillion (approx. USD $12.1 billion) in cash money for the holiday period.

Read more: Islam & Indonesian Culture: Impact of Idul Fitri on the Economy

The total cash outflow of IDR 140 trillion this year is roughly the same as realization one year ago. This standstill is a sign that economic growth and household consumption have not rebounded yet in Southeast Asia's largest economy (household consumption accounts for about 58 percent of Indonesia's gross domestic product). Traditionally, consumption in Indonesia rises (and therefore inflation also has a peak) ahead of the Idul Fitri celebrations that mark the end of the Ramadan month. In this period consumers purchase a large quantity of food items, clothes and gifts.

Although the 0.66 percent (m/m) inflation in June was the highest monthly June inflation pace in the past three years, it needs to be emphasized that the Idul Fitri celebrations started earlier in 2016 and therefore June should carry a larger chunk of inflation this year.

Inflation in Indonesia:

Month  Monthly Growth
 Monthly Growth
 Monthly Growth
January          1.07%         -0.24%          0.51%
February          0.26%         -0.36%         -0.09%
March          0.08%          0.17%          0.19%
April         -0.02%          0.36%         -0.45%
May          0.16%          0.50%          0.24%
June          0.43%          0.54%          0.66%
July          0.93%          0.93%
August          0.47%          0.39%
September          0.27%         -0.05%
October          0.47%         -0.08%
November          1.50%          0.21%
December          2.46%          0.96%
Total          8.36%          3.35%

Source: Statistics Indonesia (BPS)

Meanwhile, Indonesia's state-owned energy company Pertamina prepared a larger quantity of fuel reserves as rising demand during the Idul Fitri holiday (4 - 8 July 2016) causes consumption of unsubsidized fuels to nearly double (particularly Pertalite and Pertamax). Pertamina stated that it now has enough gasoline and diesel fuel reserves for 20 days to supply the 2.4 million cars and 5.6 million motorcycles that are estimated to fill the roads during this year's holiday.


Lex McGuir |

The inflation rate in Indonesia is always understated and has traditionally always been understated!