MACROECONOMIC ANALYSIS SERIES: Inflation Outlook 2021

  • Throughout 2020, we observe an overall shallow inflation landscape, as made apparent by its inflation rate being the lowest in many years before (1.68%). The most important contributor to such a decrease in inflation is the administered inflation, for whic h we have observed a decrease of 0.26 bps from last year. The core inflation rate also contributes to an even more significant decrease at 1.6 bps lower than the preceding year.…
    14 Jan
    14 Jan
  • Bank Indonesia’s rate cut last month to 3.75% as the effort of boosting economic recovery has not reflected in Rupiah depreciation, thanks to investor’s confidence in the domestic market. Rupiah has been relatively manageable amidst the prolonged uncertain condition of the pandemic. However, there is still no sign of improvement in aggregate demand in the short term, as the higher inflation last month was mainly driven by the higher prices due to the lack of food supply during the rainy season. Despite the sign of recovery from the higher global demand as reflected by the higher-than-expected Indonesia’s exports in November, the potential robust recovery is still uncertain as we have to see the future condition of the health issues and the effectiveness of the vaccines soon. However, the potential stricter restrictions due to the worsening pandemic all over the world since early December should be weighted on the future policy decision held by the government as well as BI. If the full shutdown happens as the efforts to reduce the potential hike in the number of virus cases during the end-year holiday, the consumer will hold back their spending, thus, aggregate demand will be muted. Further, the investor will see this movement as the bleaker outlook of economic recovery and they will hold back of flight back their assets into the haven market. Considering the prolonged uncertain condition of the health crisis and potential stricter restrictions soon, any monetary easing by cutting the policy rate will be too costly and…
    17 Dec
    17 Dec
  • Inflasi (YoY) pada bulan November 2020 kembali mencatatkan peningkatan sebesar 0,15 bps relatif terhadap bulan sebelumnya, hingga menjadi sebesar 1,59%. Kendati demikian, data menunjukkan bahwa peningkatan inflasi tersebut lebih disebabkan oleh kontraksi dari sisi pasokan (supply) ketimbang perbaikan pada sisi permintaan atau daya beli masyarakat. Inflasi barang bergejolak, yang mengandung inflasi komoditas pangan, mengalami peningkatan sebesar 0,89 bps dibandingkan bulan sebelumnya, hingga menjadi sebesar 2,29% (MtM). Kami berpendapat bahwa naiknya inflasi pada komponen bergejolak disebabkan oleh musim penghujan yang menghambat proses distribusi pada rantai pasok komoditas pangan.…
    02 Dec
    02 Dec
  • Indonesia officially fell into recession since the 1998 Asian financial crisis as the economy contracted again in Q3-2020 by -3.49% (y.o.y), albeit at a slower pace than the previous quarter. GoI indeed needs to accelerate the implementation of stimulus packages, in particular to prevent those who have lost their jobs from falling into poverty and to save businesses that are at the brink of bankruptcy, while continuing several containment and mitigation measures of the Covid-19 pandemic in order for the economy to fully rebound from its dismal growth in 2020.  Inflation remains below expectations and without any signs of pricing pressures, indicating a prolonged weak of aggregate demand.…
    18 Nov
    18 Nov
  • Economic activities continue to shrink in Q2-2020 where economic growth plunged to -5.32% (y.o.y), much lower than the positive growth in Q1-2020 of 2.97%. The health crisis has halted the economy in nearly all economic sectors with the top three sectors of Indonesia’s economy (manufacturing, wholesale & retail trade, and construction sectors) experienced a more profound negative growth compared to the overall economy. Moreover, economic downturn was also fully reflected in the expenditure side, where the household consumption’s growth dropped to -5.51% (y.o.y) from its positive growth in Q1-2020 of 2.84%. Mobility restriction, precautionary behavior, and labor income losses have led to a sharp contraction in almost all subsectors in consumption, except consumption in health & education and equipment. The limited business activities and household consumptions contributed to the slow credit growth. The low inflation figure during this health crisis also confirms that aggregate demand is still at its lowest level. While from the external sectors, trade continued to decline from its pre-pandemic level due to lower global demand and supply, though the figure has been slightly improving since July which is recorded by positive monthly growth. However, the deeper drop in imports than exports has contributed to the surplus in trade balance and lower CAD which is stood at US$-2.9 billion or equal to -1.2% of GDP in Q2-2020.…
    03 Nov
    03 Nov
  • Inflasi pada bulan Oktober 2020 menunjukkan adanya penguatan. Sepanjang bulan Oktober, inflasi umum mengalami peningkatan sebesar 0,02bps hingga menjadi 1,44% (YoY). Adapun peningkatan inflasi pada bulan Oktober diakibatkan oleh adanya penguatan inflasi kelompok bergejolak yang mengalami inflasi (MtM) untuk pertama kalinya, setelah tiga bulan berturutturut mencatatakan deflasi.  Beberapa komoditas yang berkontribusi terhadap peningkatan inflasi bergejolak meliputi cabai merah (dengan kontribusi sebesar 0,09%), bawang merah (0,02%) dan emas (0,01%).  Harga beberapa komoditas ini mengalami kenaikan yang cukup signifikan lantaran buruknya cuaca pada pertengahan hingga akhir Oktober 2020, yang pada gilirannya mengakibatkan keterbatasan pasokan komoditas tersebut.…
    03 Nov
    03 Nov
  • Uncertainty is escalating, both domestically and globally. While the people seem somewhat unconvinced that the GoI has already and is doing their best effort to solve the health issues, other issues such as protests against the newly passed Omnibus Law on Job Creation and poor implementation of reimposition of large-scale social restrictions (PSBB) in the Jakarta area certainly add fuel to the flames. As a consequence, Rupiah has been in rapid volatility since midSeptember.In addition, with no clear recovery path to be seen over the horizon, aggregate demand will likely to stay muted as people with excess saving will tend to hold their spending and business to maintain their production level at its minimum level. Thus, any monetary easing for now might be futile to spur economic activity and might risk increasing the pressure on Rupiah depreciation and capital outflow. Thus, we view that BI should hold its policy rate at 4.00% this month, while also maintaining its macroprudential policy to manage financial sector stability.…
    12 Oct
    12 Oct
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