Bank Indonesia's Analysis of February Inflation and January Trade Deficit

Lower inflation was also the result of controlled rupiah exchange rates that lessened the impact of rising international commodity prices on core inflation in February 2014 at 0.37 percent (mtm) or 4.57 percent (yoy), down from the previous month. Furthermore, inflation on administered prices was also low at 0.01 percent (mtm) or 17.37 percent (yoy), principally due to a price correction for cooking gas (12 kg LPG) in February 2014. Bank Indonesia considers the recent inflation trend as congruous to achieving the inflation target despite continuing to monitor all potential risks that could undermine achievement of said target, more specifically of 4.5±1 percent in 2014 and 4.0±1 percent in 2015.

Inflation in Indonesia:

Month	Monthly Growth           2013	Monthly Growth           2014
January	1.03%	1.07%
February	0.75%	0.26%
March	0.63%
April	-0.10%
May	-0.03%
June	1.03%
July	3.29%
August	1.12%
September	-0.35%
October	0.09%
November	0.12%
December	0.55%
Total	8.38%	1.33%

	2008	2009	2010	2011	2012	2013
Inflation (annual percent change)	9.8	4.8	5.1	5.4	4.3	8.4

^{Source: Statistics Indonesia}

Indonesia's trade balance recorded a deficit of USD $0.43 billion in January 2014. The trade gap was attributable to a smaller trade surplus in the non-oil & gas account and a larger deficit in the oil & gas account. The trade surplus in the non-oil & gas account declined from USD $2.32 billion in December 2013 to USD $0.63 billion, precipitated by an 11.60 percent (mtm) contraction in non-oil & gas exports and 1.13 percent (mtm) growth in non-oil & gas imports. Meanwhile, the oil & gas trade deficit in January 2014 swelled from USD $0.81 billion in December 2013 to USD $1.06 billion, on the back of a sharp 26.69 percent (mtm) decline in oil & gas exports due to disruptions in production stemming from inclement weather, despite a 15.81 percent (mtm) drop in oil & gas imports as a result of a 14.90 percent (mtm) decline in imports of oil products and a 16.13 percent (mtm) decrease in crude oil imports.

By commodity, the trade deficit in January 2014 was mainly due to a contraction in primary non-oil & gas commodities based on natural resources, while exports of manufactured goods continued to expand. Exports of coal and vegetable oil (with a 26.7 percent share of total non-oil & gas exports) experienced a decline, among others, due to ongoing annual contractual negotiations at the beginning of each year. Exports of ore, minerals and powdered metals (with a 2.43 percent share of total non-oil & gas exports), like copper and nickel, also dropped off as a result of implementation of the Minerba Act (affecting mineral and coal mining). Meanwhile, exports of most manufactured goods performed well, like machinery and mechanical appliances, chemical products, apparel and knitted garments (with a 13.8 percent share of non-oil & gas exports) achieving 31.92 percent (mtm), 1.43 percent (mtm), 3.41 percent (mtm) and 0.38 percent (mtm) respectively.

Bank Indonesia considers the trade deficit in January 2014 harmonious with seasonal norms and is expected to improve looking ahead. In line with seasonal trends, exports in January are always lower than those in December due the end of winter peak demand for raw materials and ongoing contractual negotiations at the beginning of each year. Looking forward, Bank Indonesia expects the balance of trade to rebound and register a surplus. The prospect of a trade surplus is due to stronger demand expected from advanced countries and a return to positive export growth for mined minerals in the wake of implementation of the Minerba Act, as well as controlled imports. Accordingly, Bank Indonesia still believes the current account deficit will run at below 3 percent of GDP in 2014 as a whole.

Indonesia's Trade Balance 2014 (in billion US Dollar):

2014	Export			Import
Month	Oil & Gas	Non Oil & Gas	Total	Oil & Gas	Non Oil & Gas	Total
January	2,50	11,99	14,48	3,56	11,36	14,92

Indonesia's Trade Balance 2013 (in billion US Dollar):

2013	Export			Import
Month	Oil & Gas	Non Oil & Gas	Total	Oil & Gas	Non Oil & Gas	Total
January	2,66	12,72	15,38	3,97	11,48	15,45
February	2,57	12,45	15,02	3,64	11,67	15,31
March	2,93	12,09	15,02	3,90	10,99	14,89
April	2,45	12,31	14,76	3,63	12,83	16,46
May	2,92	13,21	16,13	3,43	13,23	16,66
June	2,80	11,96	14,76	3,53	12,11	15,64
July	2,28	12,81	15,09	4,14	13,28	17,42
August	2,72	10,36	13,08	3,67	9,34	13,01
September	2,41	12,29	14,70	3,72	11,79	15,51
October	2,72	12,99	15,70	3,47	12,20	15,67
November	2,77	13,17	15,94	3,70	11,21	15,15
December	3,41	13,58	16,98	4,22	11,24	15,46
Jan-Dec	32,63	149,93	182,57	45,27	141,36	186,36

^{Source: Statistics Indonesia}

Communication Department
Bank Indonesia

Tirta Segara
Executive Director

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