Inflation Seen Easing With The Idul Fitri Holiday Over

By webadmin on 09:10 pm Aug 31, 2012
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Muhamad Al Azhari

Inflation may ease slightly in August after price pressures receded in the wake of Idul Fitri celebrations marking the end of the Muslim fasting month.

The Central Statistics Agency (BPS) will release inflation and trade figures for the month on Monday.

Anton Gunawan and Dian Ayu Yustina, economists from Bank Danamon, estimated a slight decline in August’s year-on-year inflation rate to 4.41 percent, from 4.56 percent in July.

Prices typically rise, particularly for some food products, during Idul Fitri. Transportation costs, such as tickets for intercity buses, airplanes and ships, also increase as millions of people visit relatives outside the cities during the holiday. When the celebrations are over, prices return to normal.

The BPS will also release export and import data for July. Analysts expect that the country’s trade balance to remain under pressure.

“A combination of strong domestic demand and lackluster export growth [also affected by commodity prices] may continue to mean that Indonesia’s trade balance has remained under pressure,” said Gundy Cahyadi, an economist at OCBC Bank in Singapore.

OCBC projected that Indonesia would post a $1.6 billion trade deficit.

“Indonesia’s growth momentum has been largely dependent on its robust investment growth, which is likely to have propped up the imports of capital goods,” Cahyadi said.

Indonesia posted a $1.3 billion trade deficit in June, which was the third consecutive month with a deficit. That brought the trade deficit for the second quarter to $2.29 billion.

“At this juncture, we don’t expect any Bank Indonesia rate move,” Cahyadi said, referring to the central bank.

Cahyadi said inflation was likely to remain manageable. Despite the prediction that inflation will inch its way to 5.5 percent by December, he said the full-year figure “should remain within Bank Indonesia’s target.”

The central bank is targeting inflation at a range of 3.5 to 5.5 percent this year.

Royal Bank of Scotland’s senior regional economist, Erik Lueth, said in a statement on Thursday that Indonesia’s economy was forecast to grow at 6.2 percent for 2012, despite weak external demand.