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Today's Headlines Inflation

  • IMF: What about the Fragile Five Emerging Economies in 2014?

    Five emerging markets, India, Brazil, Turkey, South Africa and Indonesia, have become known to the world in 2013 as the ‘Fragile Five’, a term coined by analysts at Morgan Stanley. This term refers to those five emerging economies that were considered most vulnerable to the winding down of the US Federal Reserve’s quantitative easing program (bond-buying program) as capital inflows dried up, or, in fact reversed. The five countries were assessed as risky due to their twin fiscal and current-account deficits, slowing economic growth and high inflation.

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  • Inflation in Indonesia Achieves Target unless Subsidized Fuel Prices Increase

    Bank Indonesia Governor Agus Martowardojo expects that inflation in July 2014 will be under control. However, there are several factors that trigger inflationary pressures. These include the holy Islamic fasting month Ramadan and subsequent Idul Fitri celebrations at the month-end, as well as higher electricity tariffs and the start of the new school season (inflation in July is traditionally higher than in other months due to seasonal factors). Martowardojo still believes that the year-end inflation target 3.5 to 5.5 percent can be achieved.

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  • Bank Indonesia Keeps Key Interest Rate (BI Rate) at 7.50% in July 2014

    The central bank of Indonesia (Bank Indonesia) decided to keep its benchmark interest rate (BI rate) at 7.50 percent at today’s Board of Governor’s meeting. The lending facility as well as deposit facility were maintained at 7.50 and 5.75 percent, respectively. The central bank believes that the current interest rate environment is able to push the inflation figure back to its target range of between 3.5 and 5.5 percent by the year-end. Earlier this month, Statistics Indonesia announced that inflation has eased to 6.70 percent (year-on-year) in June 2014.

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  • Gaikindo: Ahead of Lebaran, Indonesian Car Sales Grow 13% in June 2014

    According to data from the Indonesian Automotive Industry Association (Gaikindo), domestic car sales in Indonesia rose 13 percent to 109,706 car units in June 2014 from the previous month (97,147 vehicles) as people increased car purchases ahead of the Idul Fitri (Lebaran) festivities, which commence after the holy fasting month of Ramadan has ended on 28 July. Idul Fitri involves the exodus of millions of Indonesians from the cities to their places of origin. Ahead of this celebration, car sales always increase.

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  • Danareksa Institute: Indonesian Consumer Confidence Declined in June

    Ahead of the release of the Indonesian government’s official June consumer confidence report (expected to be released today), a survey conducted by the Danareksa Research Institute shows that Indonesian consumer confidence may have weakened 0.3 percent to 94.8 points in June 2014 amid concern about job availability and an expected slowdown in economic growth of Indonesia for the six months ahead. A reading below 100 points indicates pessimism, while a reading above 100 points indicates optimism.

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  • Inflation in Indonesia: Consumer Price Index Rises 0.43% in June 2014

    On Tuesday morning (01/07), Chief Statistician at Statistics Indonesia (BPS) Dr. Suryamin announced that inflation rose 0.43 percent (month-on-month) in June 2014. The foodstuff component provided highest inflationary pressures in the past month. On a year-on-year basis, headline inflation eased to 6.70 percent from 7.32 percent in May 2014. Calender year inflation (up to June 2014) rose to 1.99 percent. Later today, Indonesia Investments will publish an analysis of June inflation.

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  • A Forecast on Indonesia’s May Trade Balance and June Inflation

    Indonesian Finance Minister Chatib Basri estimates that the trade balance of Indonesia may post an USD $500 million surplus in May 2014 amid improved performance of the country’s crude palm oil (CPO) exports, both in terms of price and volume (crude palm oil being one of the most important foreign exchange earners of Indonesia). Concern about Indonesia’s trade balance (and current account balance) had returned after Indonesia recorded an USD $1.96 billion deficit in the previous month.

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  • Indonesia Financial Update: May 2014 Trade Balance and June 2014 Inflation

    The central bank of Indonesia (Bank Indonesia) expects to see a trade surplus in May 2014. Governor of Bank Indonesia Agus Martowardojo stated that he is optimistic that Indonesia’s trade balance will show positive growth after recording a shocking deficit of USD $1.96 billion in April 2014. This deficit was mainly the result of weak global demand for crude palm oil and coal, both of which are Indonesia’s most important foreign exchange earners in the non-oil & gas sector. However, this global demand is expected to have remained weak in May.

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  • Higher Electricity Price Will Have Limited Impact on Indonesian Inflation

    Indonesian Finance Minister Chatib Basri expects that the higher electricity tariffs which may be introduced per 1 July 2014 (for 400-950 watt capacity) will have a relatively small impact on the pace of inflation in Southeast Asia’s largest economy. “If introduced, the higher electricity price may add 0.1 or 0.2 percentage point to inflation. The limited impact of this price hike on Indonesian inflation means that the government will not revise its inflation target for 2014 yet,” Basri said. The Indonesian government targets an inflation growth rate of 5.3 to 5.5 percent.

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  • Bank Indonesia: Consumer Confidence in Indonesia Increases in May 2014

    According to Bank Indonesia's consumer confidence survey, Indonesian consumers were more optimistic in May 2014 compared to the previous month. Consumer confidence in Southeast Asia's largest economy increased to 116.90 in May 2014 from 113.90 in April. The increase indicates that Indonesian consumers are more optimistic about the current condition of the Indonesian economy as well as conditions in the coming six months. The result in May 2014 was also higher than in the same month in 2013 (112.8).

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Latest Columns Inflation

  • Fitch Ratings: Major Indonesian Banks Resilient Against Market Turmoil

    According to global credit rating and research agency Fitch Ratings, Indonesia's major banks are robust against the rupiah currency slide due to their low unhedged foreign currency exposure, strong loss-absorption cushions and - in some cases - foreign ownership. The slowdown in the economy will weigh on these (rated) banks' operating environment, but is unlikely to damage their credit profiles to any great extent. Below we provide Fitch Ratings' report. This report can also be accessed on their website.

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  • Indonesia Manufacturing PMI Contracts Sharply in August 2013

    HSBC's latest release of the Indonesia Manufacturing PMI did not paint a positive picture as Indonesia's manufacturing activity was reported to have contracted sharply in August 2013. The index declined to a 15-month low amid a contraction of output, new orders and export business. Payroll numbers fell at the fastest rate in the history of the HSBC survey. The August index stood at 48.5, down from 50.7 in July 2013, and marks the fourth consecutive month of decline. A reading below 50.0 indicates a contraction in manufacturing activity.

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  • High July Trade Deficit Causes Indonesia's Stock Index to Fall 2.23%

    Indonesia's benchmark stock index (IHSG) went down 2.23 percent on Monday (02/09) after Statistics Indonesia (BPS) released a number of macroeconomic data. The country's inflation pace increased to 8.79 percent year-on-year, while it posted a record monthly trade deficit in July 2013 (USD $2.31 billion). Investors have been highly concerned about the development of Indonesia's current account deficit and after it became known that the figure was high in July, the IHSG quickly lost value.

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  • Government Stance on Indonesian Economy and Investors' Reaction

    Last week Friday (30/08), Indonesia's benchmark stock index (IHSG) ended 2.23 percent up to the level of 4,195.09 points, continuing its three-day 'winning streak'. Underlying reasons being the central bank's new policy package (that was released as a response towards the negative impact of global turmoil on Indonesia's financial stability) and the higher benchmark interest rate (BI rate). The BI rate was raised 50 basis points on Thursday (29/08) to 7.0 percent to stabilize the weakening rupiah that fell to IDR 11,000 per US dollar.

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  • Indonesia Stock Exchange (IHSG) Extends 'Winning Streak' on Friday

    The decision of Indonesia's central bank (Bank Indonesia) to raise its benchmark interest rate by 50 basis points to 7.00 percent and its deposit facility (Fasbi) by 0.50 percent to 5.25 percent seem to have had a good impact on the value of Indonesia's stocks and the rupiah. Indonesia's benchmark stock index (IHSG) rose 2.23 percent to 4,195.09 points on Friday (30/08), implying a three-day winning streak. Since the first trading day of this year, the IHSG is down 3.47 percent.

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  • Indonesia Stock Index (IHSG) Continues Rebound with 1.92% Rise

    For the second day in a row Indonesia's benchmark stock index (IHSG) was able to post a gain. Today, it rose 1.92 percent to 4,103.59 points. This rebound is possibly the result of the higher key interest rate. Yesterday, it was announced that the central bank (Bank Indonesia) scheduled an extra meeting to discuss monetary policy. Immediately speculation emerged that the BI rate might be raised by 50 basis points. And indeed it was raised, much to the liking of many investors and analysts.

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  • Indonesian Government Revises State Budgets of 2013 and 2014

    The government of Indonesia has revised the macroeconomic assumptions that are stated in the State Budgets (APBN) of 2013 and 2014 after a meeting with the budgetary body of the House of Representatives (Badan Anggaran DPR) on Wednesday (28/08). It is the third time that the 2013 State Budget has been revised in order to put it more in line with recent global developments. As the government was also too optimistic when drafting the 2014 Budget, it felt the need for a revision (only 12 days after the announcement of the Budget).

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  • Financial Market Update Indonesia August 2013: Rupiah, Inflation and GDP

    Although Indonesia is one of the victims of the reversal of investment flows from emerging markets to developed markets, it is still far from a crisis. Global uncertainty regarding the possible ending of the Federal Reserve's monthly USD $85 billion bond-buying program (QE3) and, to a lesser extent, the possible invasion of the US in Syria have worried investors and resulted in the withdrawal of funds from emerging markets. Funds are flowing back to western developed countries that have recently been showing signs of continued economic recovery.

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  • Current Account Deficit of Indonesia Expected to Ease to 2.5% of GDP

    Indonesia's current account deficit, which caused much alarm among the investor community, is expected to ease to about 2.5 percent of gross domestic product (GDP) in the second half of 2013. This assumption is supported by Indonesia's central bank and various analysts. The country's current account deficit reached USD $9.8 billion or 4.4 percent of GDP in Q2-2013. In combination with the weakening rupiah, higher inflation and the possible end to the Federal Reserve's quantitative easing program, investors have been pulling money out of Indonesia.

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  • Indonesia's Benchmark Stock Index (IHSG) Falls 1.18% on Monday

    After market participants had time in the weekend to think over the 'rescue packages' of the Indonesian government and central bank (Bank Indonesia) that were released on Friday (23/08), they seemed unconvinced about the short-term impact of the packages. As a result, Indonesia's main stock index (IHSG) fell 1.18 percent to 4,120.67 points on Monday (26/08), which is the IHSG's lowest level since 7 September 2012. The Indonesian rupiah gained 0.06 percent to IDR 10,841 (Bank Indonesia's mid rate).

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