Indonesia: Inflation picked up pace in February – UOB

Enrico Tanuwidjaja, Economist at UOB Group, reviewed the latest inflation figures in Indonesia.

Key Quotes

“Inflation rate pick up in February at 2.98% y/y vis-à-vis January’s 2.68%, mainly driven by higher prices of garlic and cayenne. On a year-on-year basis, food inflation surged to 6.02% in February vs. 4.31% in January... Meanwhile, core inflation (which does not account for volatile food prices and administered prices) slowed slightly to 2.76% y/y vs. 2.88% a month earlier.”

“We have expected higher inflationary pressure from food due to the COVID-19 outbreak as China is Indonesia’s main source of garlic, shallots, and onions; amounting to 94% of Indonesia’s import of edible vegetables (HS-07) in 2018… Going forward, we view that food inflation will continue to edge higher following disruption in imports of edible vegetables (HS-07) and edible fruits (HS-08) from China for the 1H 2020. In addition, we also expect higher headline inflation on the back of a rise in administered prices… Nevertheless, we continue to see the full year inflation average to register at 3.5%, well within 2.0% – 4.0% central bank’s official target range. Stable inflation rates will continue to bode well in supporting the overall economic growth momentum for Indonesia.”