Indonesia January inflation eases to 2.57%, in line with forecast
[JAKARTA] Inflation in Indonesia declined in January driven by lower prices of chilli and transportation, according to data released by the country’s statistics agency on Thursday (Feb 1).
Annual inflation in South-east Asia’s largest economy slowed to 2.57 per cent in January, from 2.61 per cent in December 2023.
On a month-on-month basis, inflation in January was 0.04 per cent lower than previous month. The growth is also the lowest since September 2023, and in line with the median forecast of 27 economists polled by Bloomberg.
Core inflation, which excludes government-controlled prices and volatile food prices, decreased to 1.68 per cent in January due to cooling prices in house rental costs and gold jewellery, said Statistics Indonesia acting head Amalia Adininggar.
This marks the 13th consecutive month the gauge has slowed, reaching its lowest point since December 2021.
Analysts from OCBC Bank expect that benign inflationary pressures and contained external pressures will enable the Indonesia central bank to maintain its policy rate at 6 per cent in the first half of this year, before implementing a cumulative 125 basis points cut in its policy rate starting in the second half.
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OCBC projects that Indonesia’s full-year 2024 average headline CPI will stand at 3.1 per cent, with monthly figures expected to remain within the central bank’s target.
Indonesia will be seeking to keep inflation within 1.5 to 3.5 per cent in 2024, a lower band than its 2 to 4 per cent target last year.
Radhika Rao, a senior economist at DBS Bank, said that relatively low inflation has given Bank Indonesia ample room to focus on stabilising the rupiah currency. This, he said, could be done through maintaining rate differentials, implementing need-based stabilisation measures, and intervention.
Tourism recovery
Indonesia’s tourism sector continues to enjoy a significant and ongoing recovery in 2023, marked by an increase in foreign tourist arrivals.
According to figures from Statistics Indonesia, the country had 11.7 million foreign arrivals last year, a 20.2 per cent jump compared to 2022. There was no change to the top three source markets, which are Malaysia, Australia and Singapore.
While the number of foreign tourist arrivals until December 2023 surpassed that of 2022, it remained lower than the 14.7 million arrivals recorded in the same period in 2019, prior to the Covid-19 pandemic.
Minister of Tourism Sandiaga Uno has set a target for Indonesia to welcome 14 million foreign tourists in 2024. The government said in December that is considering granting visa-free entry to citizens of 20 countries – including India, the US, China and Australia – in order to deliver a boost to the tourism sector and the economy as a whole.
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