The Indonesian Palm Oil Producers Association (Gapki) believes that it is difficult for Indonesia to achieve the government’s target of collecting USD $36 billion by 2019 through crude palm oil (CPO) exports as several government policies disturb the performance of CPO exports. Moreover, global commodity prices (including palm oil) are still showing a downward trend - hence limiting foreign exchange earnings - as global economic growth remains sluggish. Economic growth of China, a major CPO importer, is expected to slow further this year.

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Indonesia’s inflation eased significantly in January 2015 to 6.96 percent year-on-year (y/y) from 8.36 percent (y/y) in December 2014 as the government’s January fuel price cut translated into lower transportation costs across Southeast Asia’s largest economy. In January, the Joko Widodo administration cut fuel subsidy spending and moved a step closer to a full market-based price mechanism for low-octane gasoline and diesel. As a result - amid low global oil prices - prices of diesel and gasoline fell by an average of 14 percent.

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Indonesia’s rupiah exchange rate weakened on Friday’s trading day (30/01) in line with the performance of several other Asian currencies. South Korea’s won fell on strengthening expectations of an interest rate cut and Japan’s yen declined on the slowdown of government bond sales. For market participants these were reasons to purchase US dollars at the expense of the rupiah. Indonesia’s currency had depreciated 0.41 percent to IDR 12,633 per US dollar based on the Bloomberg Dollar Index at 2:35 pm local Jakarta time.

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Inflation in Indonesia is expected to have eased to 7.50 percent year-on-year (y/y) in January 2015 on the back of cheaper domestic fuel prices (triggered by sliding global oil prices). The month-on-month pace (m/m) in the first month of 2015 may have tumbled to near zero percent from 2.46 percent (m/m) in December 2014. Last year, Indonesian inflation had accelerated to 8.36 percent (y/y) primarily due to the implementation of higher prices for government administered low-octane gasoline and diesel in November 2014.

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