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Developments in Monetary Sector 2014:Q1
Rupiah Continues to Depreciate
High inflationary pressure in Indonesia is often attributable to non-monetary factors such as poor infrastructure, floods, and natural disasters. Such events have often ended up sending prices of food prices higher, which in turn fuels inflation. Inflation in January 2014 rose sharply compared to the position in December 2013 (8.08%, y-o-y). Besides, the increase in prices of commodities that are under government direction and control—such as the increase in liquefied petroleum gas which occurred at the beginning of the year—also contributed to the drastic rise in inflation.
International 2014: Q1
In January 2014, the trade account fell back into deficit after three consecutive months of surplus (October – December 2013). During 2013, Indonesia balance of trade showed a deficit of USD 4.06 Billion, which constituted a deterioration from a trade deficit of USD 1.66 Billion in 2012. Rising trade deficit in Indonesia in 2013, is largely attributable to the fact that the surplus on trade balance of non oil and gas was smaller than the deficit on trade balance of non oil and gas. On a month-to-month basis, balance of trade registered a decline of 128% from a surplus of USD 1.53 Billion in December 2013 to a deficit of USD 0.43 Billion in January 2014. The condition was by and large caused by a decline in Indonesian exports that was larger than a decline of imports, 14%, and 3%, respectively.
Latest Economic Developments 2014:Q1
The economy registered improvement largely due to growth in the services and net exports
Indonesian economy shows some slight improvements in quarter IV-2013, registering 5.72% growth year-on-year, which was lower than 6.18% in the same period last year. This was largely attributable to the incessant pressure on the current account and depreciation of Rupiah, coupled with rising inflation. The deficit on the current account over the last three quarters stoked inflation, which in turn induced an upward revision of reference interest rate, followed by depressed investment. Thus, despite the fact that the level of current account deficit showed a significant decline from USD 8.5 Billion in the previous quarter to USD 4 Billion in quarter IV-2013, the economic growth of 5.78% registered in 2013 was lower than 6.23 % recorded for 2012.