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Inflation jumps to nearly 3-year high, GDP growth steadies
The latest data casts inflation as a key risk to Indonesia’s post COVID-19 pandemic economic recovery.
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Vehicles are stuck in a traffic jam on the toll road heading out of Jakarta, in West Karawang, on April 28, as people head to their hometowns for the Idul Fitri festivities. (AFP/Bay Ismoyo)
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tatistics Indonesia (BPS) reported on Monday that inflation had accelerated to a 33-month high in April and gross domestic product (GDP) growth steadied at 5 percent in the first quarter.
The consumer price index (CPI) was up 3.47 percent year-on-year (yoy) in April, the highest since August 2019, after some price controls were lifted and as domestic demand rose during the Ramadan-Idul Fitri period. Inflation was steeper than the 2.64 percent reported in March.
GDP rose by 5.01 percent yoy in the January-March period this year, marginally lower than the 5.02 percent recorded in the preceding quarter, amid higher exports and an increase in public mobility in response to eased COVID-19 restrictions.
The latest data casts inflation as a key risk to Indonesia’s post COVID-19 pandemic economic recovery, as high inflation might pummel purchasing power and prompt Bank Indonesia (BI) to tighten its monetary policy.
The April CPI is closing in on the upper limit of BI’s inflation target this year at 2 to 4 percent. BI has held its benchmark interest rate at a record low since February 2021.
“The strong first-quarter GDP reading and a rising inflation rate will be critical considerations for Bank Indonesia as it mulls monetary policy normalization,” wrote researchers at Moody’s Analytics on Monday.
“The March quarter’s GDP growth rate will provide some assurance that the economy is ready for a rate hike."
