Apart from Indonesia's current account deficit, another indicator that is closely watched by the investor community is the country's inflation rate. After subsidized fuel prices were raised in late-June, inflation soared to 8.61 percent in July (YoY), weakening people's purchasing power (as domestic consumption accounts for about 55 percent of economic growth), thus eroding economic growth, investments and the currency. On Monday (02/09), Statistics Indonesia will release the official August inflation rate.
Something that makes matters more sensitive is that previous government forecasts for inflation in July and August turned out to be inaccurate. Inflation in July was about one percent higher (3.29 percent mont-on-month) than the government forecast. Similarly, the government and central bank expected inflation in August to ease below the one percent mark. However, this initial projection was quickly adjusted when by the end of the second week a survey indicated that prices had already risen by 1.3 percent. Such inaccurate government projections do not help investor confidence and can be punished by pulling money out from the financial markets. As such, Monday's release of the August inflation rate is an important one, particularly in current volatile times on the global markets.
Ahead of the official figure, director of statistics, distribution and services of Statistics Indonesia, Sasmito Hadi Wibowo, already provided a glimpse into the outcome of the August inflation rate when he stated that inflation in August will be below the 2 percent mark.
(annual percent change)
¹ year to date
Source: Statistics Indonesia