Bank Indonesia Press Release: Trade Balance and Inflation Update
The central bank of Indonesia (Bank Indonesia) released a press statement on Wednesday evening (01/10) in which it set out its view on the country’s trade balance and inflation after the latest economic data had been released by Statistics Indonesia (abbreviated BPS) earlier on the day. Based on information of BPS, Indonesia’s September inflation was relatively low at 0.27 percent month-to-month (m/m), while the August trade balance swung back into a deficit at USD $318.1 million.
Trade Balance of Indonesia
In August 2014, Indonesia’s non-oil & gas trade balance posted a surplus of USD $ 0.49 billion despite, lower compared to the surplus recorded in July 2014 (USD $1.72 billion). Non-oil & gas imports increased by 14.99 percent m/m, while non-oil & gas export rose by 2.14 percent m/m. This increase in non-oil & gas imports occurred to six out of ten types of major goods:
• machinery and mechanic devices
• machinery and electronic devices
• plastics and plastic products
• organic chemicals
• motorized vehicles and spare parts
• cotton
Meanwhile, growth in non-oil & gas export was supported by an increase in exports of manufactured products:
• machinery/electric devices
• rubber & rubber products
• machinery/mechanical appliances
• vehicles and spare parts
• chemical products
Non-oil & gas export growth in August 2014 was supported by enhanced demand from the European Union, Japan, India, South Korea, Malaysia, and Thailand.
Oil & gas trade balance saw a decreasing deficit from USD $1.67 billion in July to USD $0.80 billion in August. This decrease was the result from an increase in oil & gas export by 4.08 percent m/m (particularly crude oil export), while there was a contraction of oil & gas imports by 18.54 percent m/m.
Overall Indonesia’s August trade balance shows a deficit of USD $0.31 billion. The structural problem of the deficit is still the large amount of oil imports to meet domestic fuel demand
Bank Indonesia considers that the August trade balance result is still in line with the current transaction performance forecast in the third quarter of 2014. Bank Indonesia estimates that there will be an improvement of trade balance in the future due to an increase in export activities corresponding to the global economic recovery and mineral export, despite the estimated continuing deficit in oil & gas balance.
Indonesian Inflation
Inflation in September 2014 reached 0.27 percent m/m, thus decelerating from the 0.47 percentage point growth (m/m) in the previous month, particularly encouraged by low inflation pressure of volatile food and the controlled core inflation. Inflation in September was below Bank Indonesia’s forecast and below the historical average during the last five years. On the other hand, inflationary pressures of administered prices increased related to the price adjustment of several energy commodities. Annually, CPI inflation reached 4.53 percent year-on-year (y/y).
Continued price decreases in several food commodities boosted deflation in the volatile food group reaching -0.22 percent m/m or 4.21 percent y/y, supported by supplies of shallots and fresh fish which were quite abundant and the price of global food commodities that remained decelerating. Core inflation also remained under control at 0.29 percent (m/m) or 4.04 percent (y/y), in line with the decrease of external pressures related to the decrease in global commodities prices, moderate domestic demand, and the still subdued inflation expectation. Meanwhile, government policy on gradual adjustment of electricity tariffs and also the price increase of LPG-12 kg canisters have contributed to September inflation.
Bank Indonesia considers that this inflation up to September 2014 is still in line with the achievement of the bank’s inflation target of 4.5±1 percent in 2014 and 4.0±1 percent in 2015. Bank Indonesia will continue observing inflation risk related to the possibility of price adjustment of subsidized fuel oil in Quarter IV 2014. Bank Indonesia will also strengthen the coordination of inflation control with the government, both at central level and regional level, in order to minimize the continuing impact caused by it and direct the inflation expectation to the set inflation target.
Inflation in Indonesia:
| Month | Monthly Growth 2013 |
Monthly Growth 2014 |
| January | 1.03% | 1.07% |
| February | 0.75% | 0.26% |
| March | 0.63% | 0.08% |
| April | -0.10% | -0.02% |
| May | -0.03% | 0.16% |
| June | 1.03% | 0.43% |
| July | 3.29% | 0.93% |
| August | 1.12% | 0.47% |
| September | -0.35% | 0.27% |
| October | 0.09% | |
| November | 0.12% | |
| December | 0.55% | |
| Total | 8.38% | 3.71% |
Source: Statistics Indonesia (BPS)