Indonesia: Inflation looks stabilized – UOB

Economist at UOB Group Enrico Tanuwidjaja and Haris Handy assess the latest inflation figures in the Indonesian economy.

Key Quotes

“March’s 2021 headline inflation stable at 1.37% y/y vis-à-vis February’s +1.38%, according to the data released by National Statistics Bureau. Overall, the increase in both administered and volatile price inflation offset the slowdown in core inflation. The government-administered prices rose by +0.88% y/y in March vs. February’s 0.66%. Volatile prices component increased by +2.49% y/y in March vs. February’s +1.52%. Meanwhile, core inflation cooled to 1.21% y/y in March vs. 1.53% in the previous month, as consumer spending remained weak.”

“Going forward, we expect the headline inflation to remain under control, gradually recover, and exceed the lower-end of the government's 2021 inflation target (2.0% - 4.0%) on the back of demand recovery (especially later in 2H21 given the optimism from the vaccine), accommodative monetary policy, and the continuation of fiscal stimulus disbursement. Nevertheless, downside risks remain due to uncertainty surrounding the pandemic going forward, which in turn, might dampen consumers’ confidence even further.”

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