Elections in 2014 Expected to Add 0.2% to Indonesia's Household Consumption
Deputy Governor of Indonesia's central bank (Bank Indonesia) Perry Warjiyo said that as a consequence of the legislative and presidential elections, scheduled for April and July 2014, household consumption in Indonesia will grow an extra 0.2 percent. Domestic consumption, particularly household consumption accounts for around 55 percent of the country's gross domestic product (GDP). Bank Indonesia has curbed further growth of household consumption by raising the benchmark interest rate (BI rate) last year.
The central bank gradually raised its BI rate between June and November 2013 from 5.75 percent to 7.50 percent as inflation accelerated to nearly nine percent (year-on-year) after the government increased prices of subsidized fuels in late June 2013. In January 2014, inflation was still high at 8.22 percent but is showing an easing trend. The monthly inflation pace in January 2014 was 1.07 percent amid severe floods that disrupted distribution networks; a normal phenomenon in the first month of the year. The central bank still expects that this year's inflation target of 4.5 percent (plus or minus one percent) can be met.