Inflation eases again as export growth slows

The Jakarta Post , Jakarta | Sat, 12/02/2006 12:59 PM

Urip Hudiono, The Jakarta Post, Jakarta

Indonesia's latest economic indicators sent out mixed signals, with inflation continuing to decelerate, while exports experienced a slight slowdown in growth.

On-year inflation slowed to 5.27 percent in November, the Central Statistics Agency (BPS) reported Friday, with consumer prices recording no exceptional increases, except for the usual nudging up of food prices.

Meanwhile, export growth up to the end of October saw another slowdown. However, riding on the back of ongoing high global demand and prices for Indonesia's plantation and mining commodities, it nevertheless managed to record a respectable 16.36 percent rise to US$82.21 billion over the same period last year.

Commenting on November's inflation figures, BPS director Rusman Heriawan said that consumers had on a month-to-month basis paid only 0.34 percent more on average for the goods and services they consumed in November than in the previous month. Consumers in 13 major cities across the country, out of a total of 45 surveyed, even benefited from lower prices.

Last month's inflation rate compared to a 0.86 percent monthly consumer price index (CPI) rise in October. The latest figures mean that year-on-year inflation now stands at 6.29 percent. The November rate was lower than the normal monthly trend for November since 2002 of some 1 percent inflation.

By October, the economy had finally shrugged off the lingering effects of last year's fuel price hikes, which increased on-year inflation to 17 percent at the start of 2006, before easing back to 14.55 percent by September.

Meanwhile, inflation dropped to 5.32 percent between January and the end of November. Core inflation, which excludes volatile food prices and administered fuel prices, stood at 5.92 percent year-on-year, and 0.3 percent month-on-month.

November's inflation was driven mainly by a 0.65 percent increase in staple food prices -- which account for 0.16 percent of average monthly inflation -- and a 0.47 percent rise in processed food prices -- which contributed 0.08 percent to the November figures.

The lower inflation in November provides further support for the central bank's decision to cut its key rate to 10.25 percent recently, which should help boost growth in Indonesia's consumption-driven economy. In fact, growth rebounded to 5.52 percent in the third quarter on lower inflation and interest rates.

Bank Indonesia's Board of Governors is slated to hold its next policy meeting on Dec. 7. The monthly inflation trend in December -- with its usual price rises resulting from the Christmas and New Year celebrations -- has since 2002 average some 1 percent, although last December saw deflation of 0.04 percent.

On the country's export performance, Rusman said Indonesia managed to add another $8.72 billion to its export balance in October, a decline of 0.75 percent from the previous month.

Total exports amounted to $82.21 billion for the January to October period, 16.36 percent higher than during the same period last year.

This represents another slowdown in the country's export growth. In September, monthly exports fell by 1.18 percent.

However, ""The slowdown in exports could be seasonal, with trading likely reduced due to the Idul Fitri holiday,"" Rusman said. ""Growth is likely to pick up again by the year-end.""

Exports and consumer spending are expected to support growth for the remainder of 2006, with investment remaining sluggish and government spending having reached its limit for the year.

Indonesia's non-oil and gas exports in the ten months ending Oct. 31 rose 17.88 percent to $64.67 billion, with the lion's share of growth being accounted for by natural resource-based commodities such as rubber, mineral fuels, including coal, crude palm oil and its derivatives, copper and other metal ores, while oil and gas exports were up by 11.02 percent to $17.54 billion as of the end of October.

Imports between January and October stood at $50.21 billion, given the country a favorable trade balance of $32 billion.

2006 Inflation (% yoy):

January................17.03%
February...............17.92%
March..................15.74%
April..................15.40%
May....................15.60%
June...................15.53%
July...................15.15%
August.................14.90%
September..............14.55%
October.................6.29%
November................5.27%

Source: BPS

2006 Exports (US$b)
and trend (%, mtm):

January........$7.51b -7.10%
February.......$7.35b -2.19%
March..........$7.45b 1.33%
April..........$7.60b 2.01%
May............$8.34b 9.79%
June...........$8.48b 1.70%
July...........$8.82b 4.00%
August.........$8.89b 0.73%
September......$8.78b -1.18%
October........$8.72 -0.75%

Source: BPS

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