Consumer Price Index Indonesia: Inflation in 2015 Expected Below 3%
Indonesian inflation may reach 2.9 percent year-on-year (y/y) only in full-year 2015, the lowest level since 2009 when inflation in Southeast Asia's largest economy was recorded at 2.78 percent (y/y). In recent years Indonesia's inflation has been volatile with peaks correlating with administered price adjustments (primarily fuel and electricity price hikes as the government is keen on limiting spending on subsidies). Another characteristic of Indonesia is that inflation is generally high (compared to advanced economies), which is in line with the higher economic growth pace (than that of advanced economies).
In both 2013 and 2014 Indonesia's inflation rate was recorded at 8.4 percent. This high level was due to the government's decision to cut spending on fuel subsidies (gasoline and diesel subsidies). As a result inflation peaked. However, economic growth continued to slow. Since 2011 the country has been plagued by slowing economic growth due to the sluggish global economy (drastically curtailing Indonesia's export performance as low commodity prices in particular are a drag) and the high domestic interest rate environment (a strategy of the central bank to defend the fragile rupiah amid monetary tightening in the USA and combat high inflation). The combination of high inflation and slowing economic growth implies weakening purchasing power of the people.
Indonesia's monthly inflation pace in December 2015 is expected at 0.50 percent (m/m). Monthly inflation in December is usually relatively high as consumers spend more money ahead of Christmas and New Year celebrations (last year December inflation was higher than usual as the government had raised prices of subsidized gasoline and diesel in the preceding month).
Read Column: Analysis of Inflation in Indonesia
Inflation in Indonesia:
| Month | Monthly Growth 2013 |
Monthly Growth 2014 |
Monthly Growth 2015 |
| January | 1.03% | 1.07% | -0.24% |
| February | 0.75% | 0.26% | -0.36% |
| March | 0.63% | 0.08% | 0.17% |
| April | -0.10% | -0.02% | 0.36% |
| May | -0.03% | 0.16% | 0.50% |
| June | 1.03% | 0.43% | 0.54% |
| July | 3.29% | 0.93% | 0.93% |
| August | 1.12% | 0.47% | 0.39% |
| September | -0.35% | 0.27% | -0.05% |
| October | 0.09% | 0.47% | -0.08% |
| November | 0.12% | 1.50% | 0.21% |
| December | 0.55% | 2.46% | |
| Total | 8.38% | 8.36% | 2.37% |
Source: Statistics Indonesia (BPS)
Inflation in Indonesia and Central Bank Target 2008-2015:
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
| Inflation (annual percent change) |
9.8 | 4.8 | 5.1 | 5.4 | 4.3 | 8.4 | 8.4 | 2.9¹ |
| Bank Indonesia Target (annual percent change) |
5.0 | 4.5 | 5.0 | 5.0 | 4.5 | 4.5 | 4.5 | 4.0 |
¹ projection Bank Indonesia
Sources: World Bank and Bank Indonesia