Economist at UOB Group Enrico Tanuwidjaja reviewed the recent inflation figures in Indonesia and the prospects for the next periods.
Key Quotes
“March 2020’s headline inflation maintained at 2.96% y/y vis-à-vis February’s 2.98%, according to the data released by National Statistics Bureau. Overall, the increase in food, F&B accommodation, health, and personal-care-and-other-services inflation offset the deflation in transportation.”
“Overall, price pressures remain benign, bringing inflation to stay within Bank Indonesia’s to 2.0% – 4.0% target band. This may be additional consideration for Bank Indonesia (BI) to further cut its policy rate in supporting the domestic economy amidst coronavirus (Covid-19) outbreak. We expect that the BI may cut another 25bps in April’s MPC to 4.25% and it is likely to be the last rate cut for 2020, bringing the BI 7 Day Reverse Repo rate back to its lowest point before the cumulative 175bps of hikes in 2018.”
“Going forward, we view that inflation will grow moderately due to the supply disruption amidst Covid-19 outbreak while slower demand due to containment efforts (i.e. travel restriction, social distancing, work from home) will keep the inflation level in check… On the balance, we continue to see the full year inflation average to register at 3.5%. Stable inflation rates will continue to support the overall economic growth momentum for Indonesia.”
Share
